On the world's largest NFT marketplace development, OpenSea, trading volume dropped 99 percent in four months between May and August 2022, according to analytics platform DappRadar. For context, NFT is a new type of blockchain-based asset that is unique and cannot be duplicated. Think of it like a baseball card or signed jersey, something that is unique, rather than something that could be mass-produced. That makes NFTs basically virtual assets that can be used as collateral or stand-alone tokens. That said, there have been some major concerns about whether this technology is ready for prime time. There are valid questions about how widely NFTs will be adopted and whether we are only seeing the beginning of this trend or whether it will soon die down. Today,
Tepid response to shady practices
There are many unfinished projects in the blockchain space, but the NFT market is particularly riddled with scams. A large part of the NFT market is made up of shady creators who sell simple assets on the markets. This was a great opportunity for scammers given the relative ease of setting up a website and selling fake art or sports memorabilia. And the market is responding accordingly. The lukewarm response to shady practices in the NFT market is one of the main reasons why prices plunged so hard. The market just isn't taking off and people aren't getting involved with these basic markets.
Intensive cryptocurrency settlement
The global crypto market has shrunk from $1.02 trillion to $970.03 billion, a 15% decline since January 2022, according to CoinMarket's hard cap. All major cryptocurrencies have been trading in the red of late, with the drop testing even long-term investors. The price of Ethereum crashed by more than 50 percent, this also had a direct effect on the price floor of NFTs.
FOMO and unstable investment sentiments
The massive surge in the NFT market was fueled by FOMO (fear of missing out), but now that prices have dropped significantly, investors are worried about making a shaky investment. As companies simply sell basic digital assets, this has caused investors to lose interest in the NFT market. This is compounded by the fact that many of these low-value items are in centralized markets, creating a lot of uncertainty among investors.
Lack of clear use cases for NFT
The main appeal of NFTs is that they have real-world value. Everything that is sold in a market can be sold again later. While this works great for things like digital art, it's not very useful for digital assets like clothing or sneakers. Sure, you can sell someone a pair of shoes, but what can you do with that pair of shoes? You can't use them, and it's not like you can resell them later. There are no clear real-world use cases for NFTs, making it difficult to see how these items will ever be worth anything. That's why almost all popular NFTs are digital art. It's the only thing that makes sense in the real world. And while centralized marketplaces can help increase the value of NFTs, they simply won't be worth much if the underlying blockchain project fails.
NFTs are subject to the same problems as ICOs
There is a lot of buzz in the blockchain space, and it seems like every new project is going to change the world. But the truth is that only a few blockchain projects succeed and the rest fail. Centralized markets are middlemen who keep a portion of each sale of digital assets. What's more, they charge high listing fees and don't guarantee that they won't sell you a fake item. So even with the success of centralized NFT marketplace development, NFTs still face the same problems that Initial Coin Offerings (ICOs) face. The only difference is that ICOs promise to build blockchain projects,
The NFT market is tanking and will likely remain depressed for some time. For investors, the crypto markets are very volatile and there is no telling when the next bull run will come. Once prices rise again, the NFT market could be the next big investment.