As the broad crypto market battled bearishness, the NFTS space has seen an extended slump. The leading NFT collection by market cap, BAYC (Bored Ape Yacht Club), has witnessed its floor price plunging by 20% within the previous week.
The swift decline has had the collection’s components on non-fungible token lending sites risk liquidation. Colin Wu, a renowned cryptocurrency journalist, stated that some BAYC pieces in Blur NFT marketplace have their floor prices beneath 50 ETH.
Wu added that such developments saw 31 BAYCs (currently) in BendDAO’s liquidations auctions. BendDAO is a decentralized NFT liquidity protocol (peer-to-pool-based) for NFT borrowing and lending. However, BAYC isn’t the only renowned NFT collection struggling, especially following FTX’s collapse.
DappRadar data indicates that other blue-chip NFTs had their floor prices nosediving within the previous seven days. The past week saw NFT collections such as God’s Unchained, Otherdeeds for OtherSide, MAYC (Mutant Apes Yacht Club), and CryptoPunks plummeting by 14%, 37%, 31%, and 15%, respectively.
Such a market outlook makes many NFT holders vulnerable to colossal losses. Nevertheless, the market exhibits some bullishness. Collections (except God’s Unchained saw a 29% volume drop) have seen increased sales volume amid the plunging floor prices.
FTX’s Fall and the NFT Market
Indeed, FTX’s debacle rattled the broad cryptocurrency market. Moreover, BAYC’s floor price experienced intensified dip following revelations that the collection’s owner, Yuga Labs, has connections with Sam Bankman-Fried and could have lost money amid FTX’s implosion.
NFTGo data shows Yuga Labs had BAYC treasury & more than 18K Ether royalties on BlockFolio. Remember, FTX previously bought BlockFolio. Meanwhile, FTX stated that it mitigated the potential loss as it transferred the cash to Coinbase Custody a week before.
Why NFT Market Slumped in 2022
- Tepid Reaction to Malpractices
The blockchain industry exhibits multiple sketchy projects. Meanwhile, NFTs boast several shady creations selling as assets. That offered scammers a lucrative opportunity, considering the ease of creating websites and selling fake digital art. Meanwhile, a tepid reaction to malpractices within the NFT marketplace has contributed to the massive price crashes. The market isn’t picking up.
- Massive Cryptocurrency Sell-off
2022 has witnessed the broad cryptocurrency market reducing to $970 billion from $1.02 trillion since January this year – a 15% drop – according to Coinmarketcap. All leading digital tokens have charted reds recently, with intensified falls testing even longer-term investors. Ethereum saw its price decline by over 50%, impacting NFT collections’ floor prices.
- FOMO & Shaking Investment Bias
FOMO drove the enormous surge in the NFT space. However, massive price slumps have investors worried about venturing into shaky investments. Companies are selling ‘basic’ digital products. And that saw investors losing interest in NFTs. Moreover, the low-value assets remain in centralized markets, creating increased uncertainty among market players.
- Unclear Use Cases
Real-world value remains the primary appearance of non-fungible tokens. Users can re-sale whatever is available on the marketplace. While that fits digital products like art, it may not be helpful on virtual assets such as sneakers or clothing. What can you do with the virtual shoes you purchase, as you can’t re-sale or wear them?
NFTs lack clear real-world value, making it challenging to see how they will gain importance. That’s why almost all renowned non-fungible tokens are digital art – the only thing logical in the ‘real’ world.
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