June 2023 was a landmark period in the history of NFTs: the so-called NFT bubble burst, and 95% of non-fungible tokens lost their value. What were the preconditions for the market collapse and why are pictures that once blew up the digital world no longer needed by anyone? Let's try to figure everything out in this new material.
History of NFT popularity
NFT or a non-fungible token is a technology that secures a user's rights to own a digital property. The world's first non-fungible token was created almost 10 years ago by Kevin McCoy. Initially, it was a unique coin, which the developer tied to his own picture called “Quantum”. The lot was put up for auction and, unexpectedly for everyone, its creator earned $1.4 million. This was the beginning of the NFT success story.
It is impossible to exchange one NFT product for another – this is the secret of the uniqueness of the technology. Each object stores a personal digital signature confirming authorship and ownership status.
Although many people in the crypto community consider Quantum to be the world's first NFT, the history of the unique token project dates back to 2012-2013. At this time, the network developed “Colored Coins”, which are technically the first NFTs. Users could “color” a small amount of Bitcoin to symbolize a digital asset, like a stock or a bond, by using colored coins. It wasn’t a very useful tool, but it was the first step towards creation of the NFTs.
In 2015, the Ethereum network (ETH) was released. It provided developers with a convenient and viable platform for creating NFTs. In 2017, projects like CryptoPunks and Cryptokitties appeared. With their help, the NFT market began to become popular and the value of assets started to grow. The most successful was the Bored Ape Yacht Club collection. The acquisition of unique assets from it gave the holders additional privileges in the form of membership in a private yacht club and early access to new collections.
The NFT rise: 2021
The year 2021 has been called the rise of NFTs. The fact is that at this time, a certain artist Beeple sold a collage of 5,000 images at auction for $69 million, thus creating the most expensive NFT token in the world.
The most famous NFT deals of that period:
- sale of GIFs with Nyan Cat for 300 ETH;
- sale of video from James LeBron's basketball match for $200.000;
- sale of the first tweet of Twitter CEO Jack Dorsey for $2.9 million.
Until recently, the NFT market had the status of the market with the fastest growing capitalization. In 2022, its volume reached $22 billion.
NFT Market Collapse
At the end of 2022, a downtrend has started on the NFT market. Trading volumes plummeted by 97%. Everyone fell under the wave of collapse: both gaming tokens and those that were directly related to art. The largest NFT platform OpenSea suffered huge losses – its capitalization decreased from $3 billion to $350 million. Analysts report that about 23 million people currently own worthless NFTs.
Why did this happen?
There are several reasons that led to the NFT collapse:
- Market oversaturation. The rise of NFTs over the past couple of years has resulted in too many projects available on the market.
- No uniqueness. The NFT market has stopped offering unique products. The technology has existed for several years and, apparently, has now become obsolete. The feeling of exclusivity has disappeared.
- Lack of NFT market infrastructure. Although developers tried to create NFT platforms, marketplaces and specialized spaces, NFT did not have a convenient infrastructure.
- Low level of awareness. For a huge percentage of people, NFTs are still pictures that for some weird reason cost incredible amounts of money.
Conclusion
Despite the prevailing skepticism and pessimistic narratives surrounding the NFT market, there remains an unwavering hope for a brighter and more promising future for it. As the technology continues to evolve and find new ways to continue its existence, we might see some great innovations in the NFT world pretty soon.
What do you think about the NFT bubble? Share your thoughts regarding the future of the NFT market down below.
If you want to learn more interesting facts about crypto then check out our blog! You might like our articles “How to Sell NFTs in 2023” and “BRC-20 Tokens Explained”.
