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After hitting all-time highs, the NFT market is collapsing

  • Post category:Economy News
  • Reading time:2 mins read

Most of the NFT market indicators are down in the second quarter of 2022. As a reminder, the Non-Fungible Tokens(NFT) or “non-fungible tokens” in French, have unleashed the crowds of crypto-investors in recent months, these digital works of art being a new medium for speculation.

However, with the complicated global economic context linked to the war in Ukraine, the cryptocurrency market (bitcoin, ethereum, etc.) fell, and the NFT market was not spared.

According to the NonFungible website, US dollar NFT transactions saw a massive drop of 25% between the first and second quarters of 2022, with an overall volume of around $8 billion.

On the positive side, however, this decrease is relatively modest compared to the trend of cryptocurrencies. Indeed, the average price of NFTs has fallen by 6%, while the value of cryptocurrencies has almost been divided by three over the same period!

Fewer buyers and sellers

In the second quarter, the number of buyers, sellers and the number of sales decreased.

Most NFT collections have indeed lost interest for investors. In this context, it is becoming more and more difficult to make a profit from digital artworks. The resale profit fell by 46% in the second quarter, for a total loss which increased by 23% (1.8 billion dollars of profit for 1.4 billion of losses).

The collectibles segment has the highest resale loss rate, peaking at over $100 million per week. Paradoxically, collectibles still recorded the most profitable sales of the quarter.

Ultimately, NFT trading recorded a net profit of $460 million, down significantly from the first quarter ($2.3 billion). Very few new NFTs were issued this quarter, with overall supply growth of only 4%.

The market for digital artworks has therefore changed dramatically in a single quarter. For NonFungible analysts, it’s time to refocus on what really brings long-term value, because “it’s usually during bear markets that true value is built”.