NFTs (Non-fungible tokens) seemed to have taken over the crypto-landscape in late 2021, and this craze continued much through Q1 of 2022. But have you heard much about NFTs lately? Chances are you haven’t. As many of us know, the crypto market has faced a significant crash towards the end of Q2 in 2022, and subsequently the NFT market also took a big hit. Bitcoin (XBT) has been fluctuating around the $19K range, while others like Ethereum (ETH) hover between the $1K-$1.5K range. The price of Ethereum directly affects the value of NFTs due to the fact that NFTs reside on the Ethereum blockchain. As seen by the visual (provided by nonfungible.com), NFT sales have steadily declined since mid-January 2022, and have plateaued as of late.
The orange line denotes the number of NFT transactions (sales), while the white line represents these sales in USD. The figures below the chart have also continued to drop YoY (year over year) only confirming the notion that the crypto-crash has directly impacted NFT sales. This came as a surprise to many, but for those that kept a close eye on macroeconomics, this crash was always a possibility. Inflation played a detrimental role in the current standing of our world markets. The crisis in Ukraine has also hindered the value of stocks & crypto, given the fact the US Congress has spent over $50 billion in foreign aid, with over 60% going to Ukraine. This is the highest annual amount given by the United States to any foreign country since $15B was spent in Afghanistan between 2010-2020.
Dramatic interest rate hikes initiated by the Fed caused markets everywhere to plummet. We haven’t seen interest rate hikes this massive since the housing market crash in 2008. For those who got into NFTs in 2022, good luck. Many investors and crypto traders will encourage you to hold (or hodl) your assets anticipating a correction, and they may be correct – however there’s no doubt you’ll be waiting a while to see that happen. Due to this crash, many stock and crypto investors have opted to cut their losses. While more interest rate hikes are expected through Q4, things will get worse before they get better. If you’re holding onto your assets, it might be time to evaluate your portfolio for potential gains in 2023-24. As for NFTs, many experts have claimed they’re a thing of the past, but before you start liquidating your NFT collection, give it some time. With the Metaverse and virtual spaces continuing to expand, NFTs could see a reappearance in the near future.