It’s been a good week for many crypto holders. As news of the Bitcoin ETF spread, crypto prices rose across the board, with only minor exceptions.
However, this recovery has yet to reach other areas of the Web3 world. While Bitcoin prices surged 22 per cent, floor prices of even popular NFT collections continued to slide.
CryptoPunks and Pudgy Penguins are both down on a 7-day basis, with CryptoPunk NFTs selling at 4% lower and Pudgy Penguins selling at 5% lower than the previous week.
The total number of buyer addresses and first-time buyers of NFTs also set yearly lows this month.
Like many other crypto assets, NFTs took a hit during the crypto winter. During the bull market, NFTs sold like crazy, and everyone was buying into the hype.
Even celebrities got in on the action, with artistes like Justin Bieber and Steve Aoki buying Bored Apes from the BAYC collection.
Million-dollar deals for NFT projects were common, and everything from artwork to lazy screenshots became available for sale as NFTs.
Yet, as crypto prices rally, NFT prices have continued to remain low.
A report released last month showed that around 95 per cent of NFT collections have a market cap of 0 ETH, meaning that they are worthless.
79 per cent of collections have remained unsold, and researchers attributed this to excess supply in a market where there is not enough demand to keep up.
In addition, the report stated that ‘a significant portion of the NFT market is characterised by speculative and hopeful pricing strategies that are far removed from the actual trading history of these assets’, and noted discrepancies between listed floor prices and actual sales data.
In other words, the NFT space’ high was not exactly due to any real demand- but was buoyed by speculative hype. So the continued ‘rut’ is not that much of a surprise given that there are still significant doubts about the authenticity and sustainability of the current market recovery.
While NFT fans continue to bemoan the sluggish NFT market, we should take a minute to consider if the current state of affairs is really a problem.
NFTs were never made as an investment product per se. Instead, NFTs started out as a way to ensure the authenticity of a product or token, and art was simply one possible industry that NFTs could revolutionise.
Plenty of other use cases have been found for NFTs. The ARC community uses NFTs to verify members, and many people use NFT profile pictures to show membership in a certain community.
Even fast food giant McDonalds has gotten in on the action, creating a collection of 2000 Grimace NFTs on the Polygon blockchain that offers holders unique promotions every month. These NFTs are soulbound NFTs, meaning that they cannot be traded. As such, there would not even be a floor price to these NFTs even though they do bring actual utility to the holder.
In a recent podcast episode, the co-founder of Setia Law Yam Wern Jhien also pointed out that NFTs are now being airdropped into wallets to serve court documents to wallet holders when other methods fail, or when the actual person who owns the wallet cannot be identified.
NFTs are also being used to exchange trade documents like bills of lading, showing that even industries that are far removed from cryptocurrency can still benefit from the use of blockchain technology.
Evidently, while NFT markets themselves have not recovered to bull market highs, NFT technology is alive and well- and perhaps that is more important than making 10x on your next NFT purchase. Focus on the tech, and not the profits, and we see that perhaps the rut is less of a deal than we think.