Is the NFT craze dying?
The Non-fungible tokens (NFTs) market has been plummeting, leaving investors worried with massive losses and raising concerns about the future of NFTs
Utility NFTs are a diverse class of Non-fungible tokens (NFTs) with a variety of real-world use cases. They are distinctive and often made with smart contracts, just like any other NFT. Additionally, they have similar immutability, transparency and security characteristics. Utility NFTs, in contrast to ordinary NFTs, place more emphasis on the benefits, prizes and real-world uses they provide NFT holders than on how collectible they are. Without a question, the NFT gaming market has grown to be a hot one for the blockchain industry.
It should come as no surprise that utility NFTs are utilized to streamline monetary transactions and general game play in the gaming industry since NFTs are the foundation of this ecosystem and the metaverse in general.
This covers the use of NFTs as exclusive in-game products, collectibles, or valuables that may be redeemed under a play-to-earn (P2E) paradigm. NFTs could have several practical applications, including serving as digital tickets for special events.
Already, several projects have given users of their utility tokens exclusive access to events that are held behind closed doors. The use cases do not end here. Many industrial spaces are exploring utility of NFTs to introduce benefits for users as well as the brand.
Talking to Bizz Buzz, Abhay Aggarwal, Founder and CEO OF Colexion, says: "The fashion and art industries have both seen the introduction of utility NFTs through projects. Not only that, but metaverse projects have begun incorporating virtual land represented by NFTs as we approach a new era of the internet. Some initiatives might even let owners of virtual real estate take on the role of virtual landlords and lease their property to others."
Check out our post on How to Buy Land in the Metaverse if you're interested in owning digital property. NFT owners may find their digital assets to be more and more helpful when new passive income sources emerge, he said. Given these advantages and uses, this is unquestionably the pivotal moment for NFTs.
Kameshwaran Elangovan, Co-Founder & Chief Operating Officer at GuardianLink, says, "We got to admit that NFTs made the news not because they were a technological marvel but more because they were looked at as short term investments that would create massive profit."
More often than not, the biggest marketing point for NFTs was the fact that it fetched this many times returns on the first investment over a certain stretch of time then the utility day brought and the Metaverse it enabled.
We always believe that even the worst things have something good in them. This has been the case with NFTs as well. Since there were so many projects that only relied on this short-term spike, people got their much-needed enlightenment with respect to investing in NFTs, he added.
According to Elangovan, "We might not say that the initial craziness over NFTs has completely died but we can surely say that it has lost its initial luster. This has prompted a lot of brands and companies to create NFTs with real utility."
This, we believe, he goes on, is a perfect time for the change in perception for NFTs. People now start to look beyond just pictures and stop wondering why certain pixelated images and certain quirky images of anthropoid creatures get sold for millions of dollars.
The entry of big brands like Louis Vuitton, Bulgari, Hermès, and Nike into NFTs and metaverses has also got people thinking about what more could NFTs be than just images. These brands are planning proper metaverse experiences including but not limited to fashion shows, exclusive digital merchandise, and a lot more. Jump.trade, through its marketplace launched the world's first P2E cricket NFTs that enabled you play Meta Cricket League, and you can earn real cash prizes from playing the game, opening a different kind of utility.
In all of this, one thing that has stayed intact with respect to NFTs is their dimension as an investment. The only difference is that instead of looking at speculative price spikes as pointers for investing, people have started to look at long-term utility as appointed. This would mean that we will be looking at a lot of purpose driven NFT collectors and investors in the near future. Sometimes, it is important for a tech to go through its adolescence in terms of perception to ensure that it ends up in a territory of maturity.
Amanjot Malhotra, Country Head - India, Bitay, says, "Non-fungible tokens (NFTs), as they are known, have been plummeting at a high rate bringing up the question. Is their craze over? The internet collectibles ranging from cartoon characters to art had seen a boom in 2021 due to social media hype and celebrity endorsements. In addition, by the end of 2021, the NFT market had seen a whopping $41 billion spent to buy them."
To cut the hype short, the market has been plummeting, leaving investors worried with massive losses and raising concerns about the future of NFTs. Moreover, the price of selling an NFT has dropped almost 50 per cent since the late 2021 peak to around $2500 recently.
Also, late last year, it was when the number of accounts buying NFTs hit an all-time high of 380,000 on a weekly basis, but this number has fallen to about 194,000.
Trading volumes on NFT marketplaces such as open sea have dropped by about 80 per cent to around 50 million in March his year. A month before this drop, trading volumes were at the peak of 248 million.
Owning NFTs is unique; it consists of rights in an expansive universe of online holdings hosted on digital ledgers and blockchains backed by digital currencies such as Ethereum. Furthermore, the market went into a frenzy due to the popularity of NFTs showing profile pictures.
The market crash has seen a massive sell-off in Ethereum, the leading digital currency used to buy NFTs. Ethereum has plummeted by more than 40 per cent from its peak late last year. In addition, projects in decentralized finance have lost their value, especially those linked with Ethereum.
Despite the crash, experts believe that it's early to call a top in the market since there has been backing from venture capitalists, which have birthed crypto giants such as OpenSea and NFT developers such as Sorare and Dapper Labs.
The sector still experiences many scams where people lose millions of dollars to scammers. However, the industry is still young and needs time to develop technology that works and informs people.
According to NonFungible, NFT sales fell to roughly 19,000 in the first week of May this year due to declining interest. NFT wallet activity has seen the number of active wallets plummet from 119,000 to 14,000, which is a massive decline.
Experts have stated that the monthly spending on NFTs is barely rising as it was a year ago. Beneficiaries of the boom witnessed last year, such as Axie Infinity, had a play-to-earn game where players spent cash on a virtual pet to win tokens that could be traded for money. However, when player numbers started to dwindle value of its tokens and rewards crashed, bringing its market value to less than $2 billion from $10 billion.
Some projects, such as Proof collective's Moonbirds or Yuga Lab's bored ape social club, have seen their releases increase since they are signifiers of membership to an exclusive club of holders.
Lastly, NFTs have a decentralized nature meaning there are even disagreements concerning the heart of the crash. Despite the value drops, many hope to move forward with making and selling NFTs.