2022, the year NFTs fell to earth

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In 2022, holders of high-value NFTs, such as Bored Ape Yacht Club, prefer to hold their asset for possible future market upside and renewed bullish sentiment. Photo: Miguel Candela/Anadolu Agency via Getty

Has the NFT bubble burst? As we approach the end of the year, the data reveals that the market for these unique digital assets is down by almost every metric.

Yahoo Finance UK looks back on 2022, a year when digital collectibles returned to earth.

There has been a hemorrhage of value in the NFT market throughout 2022, a loss that could not be reversed despite tech companies like Meta (META) developing a digital collectible feature for Instagram, and Reddit showcasing its Collectible Avatar NFT line.

The number of active NFT wallet addresses declined throughout the year, leading to a drop in trading volume on the OpenSea NFT Marketplace, which is considered the Amazon (AMZN) of NFTs, software data shows. DappRadar blockchain tracking tool.

OpenSea’s best trading day this year, May 1, saw a record $2.7 billion (2.2 billion) in NFT trades, but the worst-performing day a few months later, August 28 , it only recorded $9.34 million in trading volume.

OpenSea said: “We’re playing the long game because we see what’s possible, so we’re not so concerned about short-term volatility.

Check: Live Crypto Prices

“We always expected foam, hype, and deflation as the community and use cases evolve, technology becomes more sophisticated, and creators figure out how to incorporate more utility into their projects. .”

As the year progressed, the broader cryptocurrency market began to slump under pressure from a gloomy macroeconomic environment led by US Federal Reserve monetary tightening and uncertainty among institutional investors. and detail.

In October, blockchain incubator and consulting firm Consensys released a report titled The State of the NFT Markets 2022 which stated, “The non-fungible token (NFT) market has had a tough few months alongside a decline most important in asset prices this year.

“A distressed macro environment has significantly reduced on-chain activity in the crypto ecosystem, driving prices across the board lower from their 2020-21 highs as investors move down the risk curve and unwind. their positions.”

The story continues

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The biggest loser in the NFT sector this year has been Arts & Collectibles which the Consensys report cited as being in continuous decline since August 21, 2022.

Cryptocurrency exchange FTX crashed in early November, coinciding with a report from Google (GOOGL) that showed searches for NFT had dropped 88% in less than a year.

Between January and September 2022, NFT trading volume plummeted 97%, from $17 billion in value to just $466 million, according to Bloomberg.

From March to June, the combined market capitalization of NFTs fell by 40%, while trading volume collapsed by 66%, suffering alongside the general collapse of the cryptocurrency market after the fall of the algorithmic stablecoin. UST of Terra.

Read more: 2022: Year in review

As the crypto market pulled back, rushing for an extended crypto winter, NFT prices and transactions fell off a cliff, with holders of high-value NFTs, such as Bored Ape Yacht Club, preferring to hold onto their asset for a possible future rise in the market and renewed bullish sentiment.

NFT Highlights 2022

But, there were some positive highlights from 2022, which otherwise saw a rollercoaster downward trajectory of the entire NFT market.

March: Instagram NFT announcement

At the SXSW festival in Austin, Texas in 2022, Mark Zuckerberg, CEO of Facebook owner Meta, took the stage to announce that his company was “working to bring NFTs to Instagram in the short term.”

However, he added that he was “not ready to announce exactly what will happen today”.

The announcement raised questions about which blockchain NFTs will be deployed on, what payment channel will be used to purchase them, and whether Instagram will become a new marketplace for NFTs, directly competing with Opensea, Rarity and Nifty Gateway.

Read more: The worst crypto scams and “cover-ups” of 2022

Many artists, musicians and fashion designers use Instagram as a platform to showcase their creations.

If Meta allowed every image on a user’s Instagram page to be monetized as NFTs, it would become a major disruptor in a market currently controlled by OpenSea, which operates using the Ethereum (ETH-USD) blockchain. ).

The announcement was followed by an Instagram statement in August about a collaboration with Coinbase and Dapper labs to create wallets for users to store funds from sales and purchases.

He said: “We now support wallet connections with Coinbase Wallet and Dapper, as well as the ability to post minted digital collectibles to the Flow blockchain.

July: Reddit Collectible Avatars

In July 2022, Reddit introduced collectible avatars as an extension of the rebuilt platforms of the Avatar Builder system.

Collectible avatars are limited-edition digital collectibles made by independent artists that grant unique benefits to their holders. According to Reddit, Avatar holders can get “special treatment on their posts and can choose customizable clothing.”

The first Avatar series of 31 special editions is sold out. Reddit users purchased them through the Reddit Collectible Avatar Shop using dollars. They are stored on Polygon-based digital wallets.

December: Donald Trump’s NFTs sell out

A surprise year-end boost for the NFT market came in December with the sale of Donald Trump’s NFT Trading Cards and raising over $5 million.

In early December, the former president posted on the Truth Social platform, “My Official Donald Trump Digital Trading Card Collection is here!”

Trump’s collection consists of 45,000 NFTs on the Polygon blockchain, priced at $99 each.

Although NFTs were widely derided by Trump supporters and critics, all 45,000 sold out in about 12 hours, according to data from OpenSea.

What are NFTs?

Non-fungible tokens (NFTs) are a unique, non-interchangeable type of digital asset.

They are used in a variety of ways and can be used to represent anything from artwork to digital collectibles to digital tickets.

The first known NFT, Quantum, was created by Kevin McCoy and Anil Dash in May 2014. It consists of a music video directed by McCoy’s wife, Jennifer.

However, 2021 has seen a huge explosion and surge in supply and demand for NFTs, with the market capitalization reaching over $40 billion.

2021 was the year the NFT market bloated and evolved into a range of digital assets with no use cases. A year in which digital images of cartoon monkeys sold for millions each, with sales from Bored Ape Yacht Club and CryptoPunks combining to peak at over $17 billion.

It was the year of NFT celebrity endorsements by Paris Hilton and Snoop Dog, culminating in the Christies sale of Beeples Everydays: The First 5,000 NFT Days for $69 million in March of that year.

When it comes to market volatility, NFT prices can fluctuate due to volatility in cryptocurrency markets.

Indeed, many NFTs are based on the Ethereum blockchain and are therefore subject to the same market forces as other cryptocurrencies.

Additionally, the value of an NFT can be affected by changes in market sentiment. If people feel bearish about the NFT market, it can lead to lower prices.

Another potential problem is lack of cash. Since the NFT market is still relatively new, there is not yet a large enough market to provide liquidity for NFTs. This means that it can be difficult to find buyers for NFTs and the lack of liquidity can lead to a decline in value.

Read more: Crypto token gives football fans the right to vote on club decisions

The unique innovation brought by NFTs was to take the work created by artists and turn it into a unique digital asset, which could be traded and stored in digital wallets, online exchanges and deployed in metaverse landscapes.

One of the most profitable use cases for NFTs is in the digital collectibles space.

Digital collectibles, such as CryptoKitties, are unique digital assets that can be bought, sold, and traded.

By using NFTs, users are able to prove ownership and authenticity of their collectibles.

This enabled a new form of digital asset trading, with users able to buy, sell, and trade their collectibles without having to worry about counterfeiting.

NFTs can also be used in the game space to represent in-game items, such as weapons, armor, and other digital assets.

Paris Hilton on stage during The NFT Revolution and What It Means For Brands panel at Cannes Lions International Festival of Creativity 2022 in France. Photo: Eamonn M McCormack/Getty for Cannes Lions

What does 2023 hold for us?

Despite the potential loss of value of NFTs, they are still considered a viable investment option. The potential applications for the technology underlying NFTs are nearly limitless, with new uses being discovered every day.

The key to buying an NFT is to do rigorous research and invest responsibly.

A study by 360 Research Reports suggests that the global NFT market size is expected to reach $73 billion by 2028, from $15 billion in 2021.

As more people migrate to online spaces and life becomes more virtual, NFTs may indeed have resistance.

Watch: What are NFTs?

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