What many feared seems to be coming true. The bubble formed around the market for non-fungible tokens (NFTs) would come to an end, according to an analysis by The Wall Street Journal published on Tuesday.
NFT sales have fallen this week to an average of 19,000 per day. This is 92% less than the 225,000 registered in September, the newspaper said, citing data from the NonFungible website.
Last week the number of active wallets in this market also increased by 88% (close to 14,000), compared to the peak reached in November of 119,000.
Like cryptocurrencies, NFT tokens are digital tokens developed using blockchain technology. They serve to certify the intellectual property of the token and guarantee its originality and irreplaceability.
- As highly speculative assets, they have been hit hard by the Federal Reserve raising interest rates.
- Furthermore, as previously announced by the security firm Chainalysis, NFTs were being used for money laundering and other criminal activities.
- The strong regulatory processes in the US and Europe, as well as the attention these assets are attracting, have forced the authorities to sharpen their eyes on this market.
The Fed plans to continue raising interest rates throughout the year, Chairman Jerome Powell and other officials have hinted. So the easy money policy implemented by the US central bank and the ECB is coming to an end.
As a result, investors are moving towards other, less speculative and safer types of investments such as scarce commodities and metals, notes The WSJ.
Assets with inflated prices
On the other hand, NFT owners were aware that their assets were inflated and did not represent their true value. NFT trade laundering is one of two ways international mafias use to launder money. The other is money laundering itself.
Chainalysis found that NFT trading was artificially increasing the price of assets. Generally, the sellers who attend the market are the same buyers, but with a different profile. In this way, an attempt is made to mislead the market regarding the value of the assets and their real liquidity.
The WSJ shows a clear example of the collapse of this stock market with the NFT case of the first Twitter Inc. tweet. Jack Dorsey, the co-founder and former CEO of the social network, sold it to the CEO of the blockchain company, Bridge Oracle., Sina Estavi, for $2.9 million in March of last year.
When Estavi tried to put it up for auction in early 2022, bidders offered no more than $14,000. The abysmal difference between the purchase price and the sale offer made the executive desist from selling it.
However, Estavi said that this did not mean that the NFT market was collapsing. He considered that it was “a normal fluctuation” and that this market is in full development, so it is not possible to predict what will happen in the future.
“This NFT is my capital, so I don’t regret buying it,” he added.
Something similar is happening with the Snoop Dogg-curated NFT called “Doggy #4292,” which evokes the image of an astronaut and was sold in early April for $32,000 worth of ether. It has now been put up for sale for $25.5 million, but has so far not received an offer higher than 0.0743 ether ($210).
Even the interest in NFTs is also plummeting. The number of internet searches for the word has fallen by about 80% since January, according to data from Google Trends.
Another factor that is affecting the market is the oversupply of NFTs. There are 5 NFT assets per buyer, according to statistics from Chainalysis. At the end of April, 9.2 million NFTs were sold to 1.8 million buyers, the firm said.