Are NFTs Here To Stay
Since its inception, NFT skeptics have warned rookie art investors and digital creators about the instability inherent in the rapidly developing and largely unregulated crypto NFT market. These stability problems were brought to the fore in the most recent market downturn, with experts connecting the news of higher interest rates announced by the US Federal Reserve and the infamous Luna stable coin de-pegging debacle to the worst crypto market downturns since the tail end of 2021 -- when Bitcoin dropped from a euphoric all-time high of almost $70,000 to a low point of around $30,000.
As the market enters what appears to be a bear market, several NFT projects have been hit with devaluations and value losses that have significantly impacted community morale. However, regardless of the FUD(crypto lingo for Fear, Uncertainty, and Doubt) being thrown around during this crisis, value investors and speculators will be relieved that while transaction volumes were falling, many NFT collections were resilient to hold the line.
How Are Popular NFT Projects Fairing?
To clarify, NFTs do not trade the same way as cryptocurrencies, as their trading volumes are drawn from user interest, network effect, and the availability of coveted NFTs. As a result, each NFT bear market serves as more of a price floor testing period rather than a real fall where you could lose your asset.
According to data from OpenSea, the leading NFT marketplace, and NFTGO, an NFT analytics site, most of the top projects have not recovered from their three-month market capitalization and trading volume low, but seem to have increased their holding sentiment and average prices.
In the last three months alone, The Bored Ape Yacht Club collection, an NFT project from Yuga labs, has lost almost 15% of its value, but its trading volume has increased by 16% over the same period. Perhaps more importantly, however, the BAYC project has increased its floor price and average price by 2% and 29%, showing buyers are still very much interested in the BAYC vision.
In the same vein, Cryptopunks, another NFT project whose IP rights were recently acquired by Yuga labs, is showing signs of resilience. The project’s market cap and trading volume reduced significantly during the worst period of the downturn – which experts believe is now over. In contrast, its number of holders remained the same, meaning the project retained its floor price. In addition, the further market analysis focused on the shorter 7-days time frame shows significant price recovery.
Likewise, other NFT collections in the top 10 show encouraging signs of recovery, and the market sentiment is generally calm. This trend can already be observed in NFT collections like Otherdeed, Art blocks, and Joyworld, which are stable and trading towards the upside. Others like BAYC, MAYC, Meebits, Sandbox, and more are on the verge of price recovery.
Other NFT Projects
Many developers and investors in the NFT space are infamous for shilling and trying to maximize profits on their various projects and collections. As a result, the NFT market is associated with notorious volatility similar to that of cryptocurrencies, making them high-risk assets. Despite this fierce competition amidst legitimate and shady projects alike, several promising collections with unlimited potential continually emerge. For example, new projects like Yuga lab’s Otherdeed, goblintown.wtf, Azuki, Chimpers, rekt guy, and many more have shown investors and speculators that both fresh and established NFTs can thrive even during hard times. A few days ago, renowned rapper Snoop Dogg, and Cozomo de’ Medici, a self-acclaimed grand patron of digital arts, announced their purchase of new rekt guy NFTs on Twitter.
The tax implications for NFTs and Crypto are complex and confusing. Be sure to seek the services of a qualified Crypto tax accountant to stay in compliance with tax obligations.
The NFTGO Blue Chip Index shows incremental signs of reversal since hitting a three-month price bottom, confirming that the worst is already behind. In sum, regardless of the threat of future crisis or pressing IP concerns, such as the theft of Seth Green's Bored Ape NFT, the NFT market has proved sustainable resilience and the robust capacity required of any financial asset. Thus, proving critics wrong yet again.