We are in a complex situation; bear till the end.
One thing needs to be clear at the outset. The NFT market is in its infancy. Currently, we are witnessing a stagnation in demand for NFTs. For example, some numbers from Opensea show total volume dropped 18.3% to 500 Million USD [331 ETH]. In addition, the number of traders went down around 8% month/month. While these numbers might give a bleak overview of the market, let’s take a second to analyze them.
Indeed the market is going through a rough path for different reasons that are pretty predictable. The market started picking up steam nearly 15 months ago, and we saw many collections go out to the market. These collections were pegged to the ETH price, so users started swapping more and more ETH to mint their favorite groups. As ETH kept increasing, collections did not adapt and were happy with the increase in ETH/USD as it increased their amassed capital.
As more and more collections started popping up, we saw a stagnation in the growth of users entering the market. Cannibalization started. Projects started eating up from other projects, and holders were attracted by different projects and started holding different NFTs. This meant two things: 1) an apparent decrease in engagement for the collection and 2) an apparent decrease in demand for each collection.
Add to that the different scandals, issues, and Rugs that happened, shedding light on influencers using their botted accounts to promote fake projects.
The US economy has gone for nearly 13 years without a recession; the Trump administration used several levers to lower the employment rate, raise GDP and bump the stock market through fiscal strategies that lower taxes on corporations, increasing profit margins and, therefore, earnings.
All of this is good, but it has to be backed by real economic growth, which was not there to support. This led to a gap between valuations and actual fundamental economic growth. It came to put pressure on the market further.
What nailed it were releases of Otherdeeds and Veefriends Series 2 that suddenly through more than 250,000 NFTs into the market, attracting volume in a way that drained the remaining demand and, coupled with lack of newcomers, crippled the market. Disclaimer here, I am not saying its is anyone’s fault, it is a combination of factors that led to offer exceeding demand.
WHAT’S THE FUTURE
We are at the outset of a new phase in NFTs, a stage where demand has to be reinitiated and retrigged in some way. The only way I see how this could happen is through combining more ownership with NFTs to create more trust in the process and a higher incentive for traditional investors to jump in. It’s all about combining NFTs with a legal structure that gives more ownership to holders.
The new meta has to be the *STARTUP META*
Once investors start jumping back in, we will see well-positioned, strong projects gain steam again, attract new investors, and continue to deliver on their brand promises and roadmap.
