The non-fungible token (NFT) market has crashed, with two-thirds of marketplaces’ transactions denominated in Ethereum dropping below $20. Formerly treasured CryptoPunk NFTs are now hitting the market at 99% off. NFTs that once sold for more than $1 million dollars can now be picked up for as low as $65,000. Nevertheless, this marked decline arrives even with those unique digital qualities and relative rarity that fueled the market’s height in 2021.
The NFT marketplace is having a moment of significant crisis right now. Falling Ethereum (ETH) prices, which is the currency typically used to buy and sell NFTs, only compound these challenges. The crashing price of ETH has been affecting how much NFTs are worth, adding to the NFT market depression. This downturn has led many to question the long-term viability and stability of the NFT market.
CryptoPunk Values Take a Hit
CryptoPunks are different digital tokens that prove ownership and authenticity, using a blockchain. Recently their value has plummeted, in some cases, up to 99 percent. One particularly illustrative example is CryptoPunk #3100, the third-most expensive NFT ever sold. It was resold recently for 4,000 Ethereum (ETH). This transaction marks an approximately $10 million shortfall for the digital wallet facilitating the sale.
The decline in value isn’t limited to a handful of niche NFTs. Many NFTs previously sold for upwards of $50 million. Today, they’re being resold at a tiny fraction of that initial expense. This market-wide devaluation is a shocking turn of events and a sudden turn of market and investor sentiment.
Notable individual sales While the NFT market as a whole is down, the five most expensive individual NFTs sold are still CryptoPunk collectibles. While the market is currently not in the greatest place, certain already established collections retain significant value. That positive value has dropped precipitously from years past. It goes without saying that how well these blue-chip NFTs perform will be the best bellwether as to whether or not the market is poised for a turnaround.
Ethereum's Price Decline Impacts NFT Market
The plummeting price of Ethereum (ETH) has played a huge role in the NFT market’s downfall. ETH is down 52% year to date, including a 50.94% drop in the past 12 weeks alone. This decline in value has an immediate effect on the perceived value of NFTs, as a large number are listed and traded in ETH.
This additional complexity is made worse by the uncertainty surrounding Ethereum’s future value. All but one of the major Wall Street firms have omitted providing ratings and price targets for Ethereum. Consequently, investors have to rely on its three-month performance to judge its worth. This institutional indifference only serves to further spike the volatility and risk of investing in not only ETH but NFTs as well.
The joint correlation between Ethereum’s price and the NFT market demonstrates the interconnectedness of the cryptocurrency and digital asset spaces. With ETH’s value decreasing, the NFTs’ perceived value is affected. This makes it an extremely hostile climate for investors and collectors.
Market Correction or Long-Term Trend?
The current downturn in the NFT market raises questions about whether this is a temporary correction or a sign of a more permanent shift. Other analysts expect the market to bounce back in the long-term. Yet others are more wary and raise alarm bells over signs of overvaluation and a lack of sustainable demand.
Collectibles NFTs such as CryptoPunks and Bored Ape Yacht Club once sold for millions of dollars. Today, they’re experiencing the backlash with an emerging reality check as market substance overtakes the tremendous initial hype. As for its long-term effect on the NFT space, only time will tell.
