Precisely, the world was vibrant with talk of NFTs after The Merge, an NFT collection, was sold for $91.8 million. Similarly, Michael Winkelmann's artwork, Everydays: the First 5000 Days, made headlines when it sold as an NFT for $61 million.
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| The Merge NFT Artwork |
The NFT trend continued throughout 2022, highlighted by the sale of a viral coffin dance meme featuring Ghanaian pallbearers for $1 million. These events stoked widespread interest in NFTs, suggesting the digital art innovation on blockchain technology isn't going anywhere soon.
However, by the year's end, discussions surrounding NFTs had significantly dwindled. Dune Analytics reported in September 2022 that NFTs experienced a staggering 97% decline in trading volume, declining from $17 billion in January 2022 to $470 million by September 2022.
NFTs transitioned from being the centre of attention to fading into obscurity, sparking questions about their current status. Once hailed as the pinnacle of blockchain innovation, NFTs now raise doubts about their relevance. Are NFTs now obsolete?
Here's what happened to NFTs
An earlier investor and collector of NFTs in Africa, Michael Ugwu - CEO of FreeMe Digital, believes Non-fungible Tokens (NFTs) are dead, however, the demise of NFTs must be understood within a broader context.
He elaborates that the interplay between crypto and NFTs is the key factor behind the perceived demise of NFTs. "NFTs literally mirror the broader crypto market cycle."
This implies that the performance of NFTs is closely tied to the state of the cryptocurrency market. In 2021, during the peak hype surrounding NFTs, Bitcoin reached an all-time high (ATH) of $69,000. Typically, a Bitcoin ATH signals a bullish crypto market sentiment.
Indeed, 2021 witnessed a bull run, with the total market capitalization of the crypto industry soaring to a record high of $2.9 trillion before the FTX crash of 2022 dealt a severe blow to the market.
NFTs also experienced a surge in value during this bull run. Ugwu himself invested around $10,000 in NFT collections such as CryptoPunks, which now boast a starting price of $153,000, and Bored Ape Yacht Club, with a starting price of $42,000.
However, unlike cryptocurrencies, NFTs are considered illiquid assets. This means that trading NFTs can be considerably more challenging in a bearish crypto market. More precisely, cryptos like as BTC, ETH, LTC and USDT generally remain liquid and can be easily sold. However, selling NFTs becomes increasingly challenging in such conditions. "But with NFTs, it is like trying to sell a car," said Ugwu.
The Intersection of NFTs and the global economy: beyond speculation to transformation
Patrick McGimpsey's analysis in Forbes suggests that NFTs experienced a decline influenced by economic uncertainty and Covid-19 pandemic which contributed to increased inflation, interest rates, and tighter monetary policy, impacting the trajectory of NFTs.
Beyond eonomic challenges, NFTs was initially driven by appreciation for art, but later got filled up with people who wanted to make quick money; NFTs market shifted towards speculation for quick profits.
However, for collectors like Ugwu, NFTs represent more than financial gain; they provide a platform for local artists, breaking physical boundaries and offering international recognition.
The transformative potential of NFTs lies in simplifying the art market process and providing proof of ownership secured on the blockchain, as exemplified by Osinachi's with Christie's, a very famous auction house in the United Kingdom.
Are NFTs coming back?
When people make a lot of money from crypto, NFTs do well," says Ugwu. "NFTs do well when people get crypto rich." He means that NFTs become popular again when the crypto market is doing well.
Understanding the relationship between NFTs, Crypto wealth, and market trends is important if you want to continue with NFTs. Crypto enthusiasts believe the market is doing really well right now, especially since Bitcoin reached a record high of $72,000 in March 2024.
Even though there hasn't been a lot of NFT activity lately, experts predict that the NFT market could be worth as much as $2.3 billion this year and could grow even more in the future. McGimpsey agrees with these predictions. He says that important NFT projects that sell digital art are still worth a lot of money.
NFTs aren't just about digital art. They can also be used for real things like selling houses or proving who owns something. And for artists who haven't tried NFTs yet, there might be more opportunities in the future. So, they should get ready to explore the potentials of the blockchain's digital art.