The number of unique NFT buyers decreased by 12% in February when compared to the previous month. This is the first time that the number of new NFT buyers has dipped below 800,000 since October 2021. Currently, the numbers stand at about 796,009. And sadly, that’s just the beginning of the bad news.
Compared to last week, NFT sales have witnessed a fall of 29.46%, and the total trade volume has dropped from January’s whopping $4.3 billion to just $2.6 billion this month. Additionally, data from Google Trends reveals that, between January and February, the search for the terms “NFT” and “metaverse” slipped by more than 60% across the global internet.
So, what do these numbers suggest? Are people losing interest in NFTs? Is the NFT market about to crash? Currently, many people are looking for answers to such questions.
Why is the NFT market slowing down?
To begin with, there could be many reasons for this downturn. For instance, the month of January saw unprecedented growth in NFT sales. NFT sales on OpenSea alone surpassed the $5 billion mark, and DappRadar claimed in its monthly report that the total NFT trade volume was over $16 billion in January 2022. Moreover, during this time, the Google Trends search score for NFT was 100 (at present, it is at a measly 42).
To this end, experts note that the NFT landscape underwent massive growth in January. After such periods of intense growth, there are always downturns. In other words, such slips are expected and should probably be anticipated, as opposed to being a cause for panic.
Such a trend can also be observed in the stock market and in the case of cryptocurrencies. For example, in November 2021, one bitcoin rose to its highest valuation of $68,000. Soon after that, it crashed and went down to $34,000. At present, one bitcoin stands at $41,744. That’s not quite so high, but it’s also not quite so low and is slowly increasing again. What’s more, experts ultimately believe that bitcoin’s price may cross $100,000 in 2022.
Another obvious reason for the downturn is the ongoing war between Russia and Ukraine.
The global markets are under stress due to the war. Prices of oil, gas, and metal are increasing, which is putting an extra burden on the COVID-hit economy of various nations. Also, although NFT and blockchain-related technologies share no overt connection with the traditional markets, the war has diverted people’s attention from digital affairs to real-world political problems, and it has also made them skeptical about the growth of the economy as a whole.
Again, this means that the contraction has logical causes and that it isn’t necessarily an enormous red flag related to NFTs in general.
Why shouldn’t you panic?
Industry experts believe that the factors mentioned above, which appear to be working against the NFT market, are not likely to cause any long-lasting slowdown. In fact, the DappRadar report highlights that, even during this slow period, the total number of NFT sales increased by two percent.
Moreover, not all the blockchain networks that power NFTs have experienced a decrease in their sales. Reports indicate that networks like Flow and Arbitrum have witnessed a significant rise in NFT trade during February.
So, looking at the facts, there are a few clear takeaways when it comes to the NFT market. For starters, the NFT market is huge now, and it could value over $35 billion by the end of 2022. In fact, experts like Jefferies Sees have predicted that the market is expected to hit $80 billion within the next three years.
But honestly, this is a little beside the point, as NFTs are about more than day trading and instant financial wins.
NFTs are being used to grow businesses, raise funds for notable causes, give artists autonomy, and expand the blockchain community. It will have its ups and downs, but when analyzing the health of the space, we need to look at more than just money. We need to look at the utility, the amount of innovation taking place, and the specific people and organizations that make up the NFT landscape. Markets matter, but it is the builders who are in it for the long haul that will ultimately determine the community’s success.