9 Factors Behind the Recent NFT Crash by@simplykalaa

9 Factors Behind the Recent NFT Crash

The most popular NFT, **Bored Apes Yacht clubs, falls for 47%**, according to the report of Bloomberg. NFT Index shows a 23% decline** as Bitcoin reaches its all-time 18-month low. Total NFT sales reached **$25 billion** in 2021, compared to $94.9 million in 2020. Despite all these, gaming industries are expanding on NFT marketplaces; Meta will integrate blockchains like Etherium, Polygon, etc. When we hear this news, it becomes crucial to know the failures behind NFT.
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Simplykalaa

Get familiar with topics such as NFT, Crypto and Finance. We believe in real world information and not fabricated data.

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I always call NFTs a hot-selling pancake in a time of economic recession. What I recall at the moment is the backstory behind the NFT and its impeccable growth in the pandemic era when everyone was on the internet more than usual.


It began on the eve of 3rd May 2014 when artist Kevin McCoy minted the first known NFT Quantum on the blockchain, a video of his wife, Jennifer, sold for 4 dollars. Slowly, Ethereum launched in 2015. NFT in simple terms, is called monetized graphics. Make digital art, digital furniture, or a music series, and sell on the NFT marketplaces.


Now when it comes to vending and buying, I will keep you updated about it in other upcoming articles. Today, I will give an inside glimpse of NFTs and whether the NFT crash is real? What is worst in trading in NFTs?

Despite its rise, NFT Index shows a 23% decline as Bitcoin reaches its all-time 18-month low. According to DappRadar, an app store for decentralized apps, total NFT sales reached $25 billion in 2021, compared to $94.9 million in 2020. The most popular NFT, Bored Apes Yacht clubs, falls for 47%, according to the report of Bloomberg.



JPG NFT Index For The Past One Year © CoinMarketCap

JPG NFT Index For The Past One Year © CoinMarketCap


According to the NFT database CryptoSlams, its market got hit with monthly sales down by US 1 Billion Dollars, which was the first time in 12 months. But despite all these, gaming industries are expanding on NFT marketplaces; Meta will integrate blockchains like Etherium, Polygon, etc.


When we hear this news, it becomes crucial for us to know the failures behind NFT, or what you can call the NFT Crash factors. It is also worth mentioning whether the worst is coming?


Number of Sales of Bitcoin (Red) vs NFT (White) in the past year © NonFungible

Number of Sales of Bitcoin (Red) vs NFT (White) in the past year © NonFungible


First, let us read the chart of NFTs and even the trend chart of NFTs. Look closely and observe the inclinations and even declinations.


Recent Deals (CryptoPunk And Ape)

Ape generated around $82.21 Million in sales in June, but it has a whopping downfall of 63%. According to the same sales volume in May, it was $223.73 Million. You can check the graph for more details down below.


Bored Ape Yacht Club © NFT Stats

Bored Ape Yacht Club © NFT Stats


Similarly, the CryptoPunk was lower than the average 12-month sales. Overall the prices have fallen, but some standout sales, such as a rare CryptoPunk, were sold for 47.5 ETH ($80,000).


Reasons Behind NFT Crash

When you understand why NFTs fall or remain static, these few reasons can help you accept why:

  • With higher inflation and rising prices, pro-investors know that there are much secured markets or growing areas where they can invest. Hence, it becomes clear that the investments are going on some real art instead of these JPEGs or video clips.
  • The crucial element that keeps the real investors away from these investments is the unawareness of the actual price of the pieces. You know that the NFTs have no transcript to set a price.
  • Numerous people buy NFTs out of their nostalgia, emotions, and joy. The fact of it not counted as investments may be one reason behind the NFT Crash.
  • The increasing number of transactions on the Ethereum blockchain has skyrocketed gas fees. This way, it becomes a more risky investment than a safer emergency fund.
  • You expect a return on something you buy because of its output, but what if it does not have a similar output? The case scenario is close to NFTs, and the economics concept Greater Fools Theory explains it better.
  • For many NFTs, the business model is close to the dot com collapse of the 90s, and we can say it is on the end of some curve. But who knows whether the curves follow a positive or negative direction.
  • Many legislations are firm in taking action on the centralized system of handling the blockchain transactions so NFT Crash can be real.
  • The harmful climatic impact due to the incline in carbon footprints from minting a single transaction is also a reason.
  • The Veblen goods that follow, like buying something expensive to show off, can also turn down NFTs. Let me explain how, for example, if that particular NFT commodity does not bring a positive outlook to its status, these investors will start buying other materials. Veblen goods are for positive rank in society.


Expert Opinion On The NFT Market

While seeking expert opinions, I can only think of a few persons. Bill Gates predicts that these markets are based on Greater Fools Theory and bring the most impact on the environment due to their higher carbon emissions. In an interview, he joked,


“expensive digital images of monkeys would improve the world immensely”


referring to the much-hyped Ape Yacht Club NFT collection.


Michael Every, Head of the Financial Market Research for Asia-Pacific, says,


"This may well be the apotheosis, the peak in the paradigm of everything bubbles."


He further adds,


“It worries me intensely even if I fully understand the dynamic that drives younger people in particular.”


Conclusion

The core message of economics lessons must not be lost in the midst of all these news and trends. As history continues to teach us various crypto lessons, we must not forget the same about NFTs.


Well, I am certainly not skeptical about them because they are somehow contributing to younger artists and designers but the economic recession can not be neglected, and so the long-term effects.


What is your take on vending and selling NFTs? Do you find it intriguing, or do you think like Gates? How do you react to NFT Crash?

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