Irreversible Tokens (NFTs) took over the world in March and April of this year, with daily headlines about record sales and major companies releasing their unique digital artworks dominating mainstream media.
Fast-forward a few months later and history has turned toward the emergence of the NFT bubble, and dark and bleak fears are warning that NFT investors are about to lose all of their money.
NFT market one year of history. Source: NonFungible
The rapid decline in prices and activity of the top NFT markets has led many to speculate that the non-fungible tokens territory will die, despite the well-known cyclical nature of the cryptocurrency market, which may come back to life with a hat.
Active users leave the ship
Active users are the lifeblood of the NFT market, but the volatility of the cryptocurrency market over the past two months, including the May 19 sale that wiped out $1.2 trillion from the cryptocurrency market, has led to a sharp drop in the number of users. events.
Number of active portfolios on NFT trading platforms. Source: NonFungible
As shown in the chart above, active portfolios in the NFT markets peaked by the end of March and have since fallen by more than 40% as low values combined with high transaction fees on the Ethereum network (ETH) drove traders away from the market. …
The decline in active portfolios coincided with a drop in sales across the board as the rapid decline in token prices exacerbated the loss of owners and collectors, who saw their valuable artwork lose up to 90% of its value overnight.
Total number of sales in NFT markets. Source: NonFungible
The drop in active users led to a 60% drop in total daily sales, which have fallen from a peak of $325 million on May 7 to $110 million today.
NFT dropped, but didn’t come out
All is not lost, however, as there are many serious proposals and interest issues for NFTs that have been noticed and embraced by entrepreneurs and traditional companies in the sector.
The blockchain ecosystem has already presented several viable options to solve the problems faced by the NFT sector, such as the launch of the Engine Efinity and JumpNet protocols, which help reduce fees and ensure interoperability between different networks.
Another popular solution is Polygon, an Ethereum side chain that allows projects to survive on Ethereum while providing access to a fast and low-cost environment. Over the past three months, a large number of NFT-focused and gaming projects have moved to Polygon, and as the crypto and NFT markets improve, these low-fee environments should contribute to increased online activity.
Top 5 NFT Trading Platforms. Source: DappRadar
While the current stats may seem weak compared to recent spikes seen over a longer period of time, it can be seen that average NFT sales grew around 300% between January and the end of May. This shows that there is strength in the sector despite the market boom that started on May 12th.
The NFT ecosystem may have seen a significant drop in token activity and value over the past month, but it’s too early to announce the death of NFT because the world has only scratched the surface of what’s possible with this new smart contract technology.