Non-funded tokens (NFT) took over the world in March and April this year with the influx of daily headlines for record sales and large companies dropping their own unique digital artwork that dominated the mass media.
Fast forward a few months and the story turned to the bursting and doom of the NFT bubble and a grim warning that NFT investors were on the verge of losing all their money.
The rapidly declining prices and activity of the best NFT markets have led many to speculate on the demise of the non-combustible symbol space, despite the well-known cyclical nature of the crypto market, which can be revived by the fall of a hat.
You knew that was coming, didn̵7;t you?
NFT are dead
(Of course, you can buy this song as NFT) https://t.co/gj6JFpFKZX pic.twitter.com/NFveBKgdRn
– Jonathan Mann (@songadaymann) June 4, 2021
Active users jump
Active consumers are the lifeblood of NFT markets, but the volatile nature of cryptocurrency markets over the past two months, including the May 19 sell-off, in which the $ 1.2 trillion was erased from cryptocurrency capitalization, has led to a sharp decline in consumer activity.
As shown in the chart above, active portfolios in the NFT markets peaked at the end of March and have fallen by more than 40% since then, as declining values combined with high Ethereum (ETH) transaction fees kept traders away from the market.
The decline in active wallets coincided with a decline in sales across the space, as rapidly falling symbol prices exacerbated the losses of owners and collectors, who saw their valuable works of art lose up to 90% of their value overnight.
The decline in active consumers led to a 60% drop in total daily sales, which fell from a high of $ 325 million on May 7 to its current value of $ 110 million.
NFT doesn’t work, but it doesn’t work outside
However, all is not lost, as there are many solid proposals and use cases for NFT that entrepreneurs and traditional businesses have noticed and covered the sector.
The blockchain ecosystem already offers a number of viable options to address the challenges facing the NFT sector, such as the launch of the Enjin protocols for Efinity and JumpNet, which help reduce charges and allow interoperability across different networks.
Another popular Polygon solution is the Etheruem side chain, which allows projects to stay on Ethereum while having access to a fast, low-cost environment. In the last three months, a large number of NFT-oriented and gaming projects have migrated to Polygon, and as the crypto and NFT market improves, these low-charge environments should help increase network activity.
While current statistics may look bad compared to recent records for all time, when viewed over a longer period of time, it can be seen that the average number of NFT sales increased by nearly 300% between January and the end of May. This shows that there is strength in the sector, although the market crash began on May 12.
The NFT ecosystem may have seen a significant decline in activity and token values in the last month, but it is too early to announce the death of NFT, as the world is only scratching the surface of what is possible with this nascent smart contract technology.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Each course of investment and trading involves risk, you need to conduct your own research when making a decision.