In a market dominated by optimism surrounding the price spikes of Bitcoin (BTC) and Ethereum (ETH), the non-fungible token (NFT) market has seen a decline in popularity. NFTs, which include digital artwork and collectibles recorded on blockchains, have recently experienced a notable loss of appeal.
According to a Bloomberg , Google searches for NFTs have reached their lowest levels since 2021, when these tokens first gained mainstream attention.
Popular NFT Collections Experience Steep Price Declines
A significant drop in sales further highlights the NFT market’s struggles. Researcher DappRadar reveals that NFT sales have decreased by more than six percent to $8.5 billion in the first five months of this year compared to the same period in the previous year.
This decline starkly contrasts the industry’s peak in January 2022, when it recorded an impressive $17.2 billion in NFT sales within a single month.
The report further notes that the sentiment surrounding NFTs hit last month when the US Securities and Exchange Commission (SEC) initiated steps toward approving exchange-traded funds (ETFs) directly investing in Ethereum.
In anticipation of this approval, some investors reportedly began reallocating their investments into ETH while divesting from NFTs.
Nicolas Lallement, co-founder of NFT data tracker NFT Price Floor, explains that capital rotation is common in crypto markets, with Ethereum likely to continue attracting and absorbing market capital, resulting in price drops for other assets like NFTs.
This year, many popular NFT collections have experienced significant price declines. NFT Price Floor reports that prices for these collections are down by 40 percent to 50 percent year-to-date. CryptoPunks, a collection minted on the Ethereum network, is trading around 2021 levels and has dropped by 29% from its lowest point in the previous year.
Similarly, collections such as Bored Ape Yacht Club (BAYC) and Chromie Squiggle have seen their price floors, based on Ethereum, decrease to approximately half of what they were at the lowest point of last year.
Market Correction Looms
Daniel Maegaard, an NFT collector, confirms that most NFT collections continue to decline or remain stagnant after the peak euphoria observed in 2021. Maegaard has recently sold several blue-chip NFTs, including works by digital artists XCOPY, Hackatao, and Coldie.
While some NFT art collections, such as XCOPY’s, have posted positive returns over the past 90 days, Lallement says the overall trend points to a market correction.
Amidst the challenges faced by the NFT market, one platform that has shown resilience is the NFT marketplace, Magic Eden. The platform has been gaining market share as trading activity on its platform has increased, as per Sara Gherghelas, an analyst at DappRadar. Although Magic Eden recorded record volume in April, trading activity has since decreased.
In sum, the current state of the non-fungible token market reflects a decline in popularity and prices. While some individual collections have shown positive returns, overall market sentiment suggests a continuation of the NFT market correction.
At the time of writing, ETH was trading at $3,480, following Bitcoin’s lead, with a sharp 5% drop in the past 24 hours and over 8% in the past seven days.
Featured image from DALL-E, chart from TradingView.com