Not Fun Times for NFTs as Crypto Market Stalls

By: James Flippin · September 29, 2022 · Reading Time: 3 minutes

Tech Tumble

As part of a broader sell-off amid the Federal Reserve’s tightening monetary policy, the crypto sector has lost $2 trillion since its November 2021 high-water mark. That includes NFTs, also known as non-fungible tokens. In fact, the numbers are especially ugly for these digital collectibles and artwork stored on blockchains. According to data from Dune Analytics, this month’s NFT trading volumes were down 97% from their peak in January of this year. That translates to a more than $16 billion drop in trading volumes.

Fewer Users

Along with the decline in trading volume, it seems fewer people may be using NFTs. DappRadar, which tracks and analyzes decentralized digital operations, reports the number of users on NFT marketplace OpenSea are down around 5% this month.

There are a few potential issues that stand out for NFTs, in addition to the so-called “crypto winter” that has set in as rates have started to rise. One is the age-old tale of declining popularity. Bored Ape Yacht Club surged earlier this year and secured an official status as the NFT industry leader. Celebrities and professional athletes celebrated the Bored Apes on social media platforms. Now, competitors like Terraforms and CryptoPunks are ranked higher.

Additionally, NFTs are struggling to provide their users with optimal security, as hacking remains a concern. This involves the potential for users to fraudulently gain access to NFTs inside digital wallets, and then sell the digital assets for profit.

Growth Efforts

The NFT slowdown has extended to companies such as GameStop (GME) which launched a new NFT trading platform in July. An initial boom of users has since fizzled. OpenSea recently added the Optimism blockchain to its network as it hopes to boost people’s interest in trading NFTs.

Some companies appear to be keen on avoiding the term NFT altogether, even if their version is similar. Starbucks (SBUX) has floated a concept known as “stamps,” while Reddit announced the launch of “collectible avatars” in July. NFTs are still a new phenomenon with an uncertain future, but the numbers seem to suggest the initial bloom is off the digital rose.

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