By Austin Simmons
The year 2022 has been marked as one of the worst in the history of the cryptocurrency market, with significant downturns in the prices of major digital assets, including Bitcoin and Ether. This downturn has been attributed to multiple factors, including tighter monetary policies from the Federal Reserve, widespread speculation and risk-taking in the crypto market, and the collapse of major crypto platforms like FTX1.
These market conditions have undoubtedly had a profound effect on the non-fungible token (NFT) industry, which heavily relies on the stability and growth of the crypto market. The trading volume of NFTs has also seen a significant decline, falling 97% from a record high in January 2022, sliding to just $466 million in September from $17 billion at the start of the year2. June 2023 saw NFT sales hitting a 12-month low with just over $1 billion sales, compared to a peak of $12.6 billion in January 20233.
The NFT market, which once saw exceptional sales like $2.9 million for a token of the first tweet by Twitter’s co-founder Jack Dorsey, a digital collage by the artist Beeple for $69 million, and $575,000 from Coca-Cola selling digital items for the metaverse, has also seen a pullback3. However, despite this overall slowdown, the demand for so-called "blue chip" NFT collections has remained relatively stable, with some collections like the Bored Ape Yacht Club seeing a decline of only 1% over a month3.
Given the correlation between the NFT and cryptocurrency markets, the decline in the latter has led to a broader slowdown in the NFT market. The decline in crypto markets has inevitably led to consolidation within the NFT market, with a likely pullback in the collections and types of NFTs that reach prominence3.
Despite the downturn, some believe that this could pave the way for the next bull market. Matt Hougan, chief investment officer at the crypto asset manager Bitwise, likens this period to previous bear markets that entered a "period of indifference" before transitioning into a new bullish phase1.
Looking forward, the trajectory of the crypto and NFT markets will likely depend on a variety of factors, including global macroeconomic conditions, regulatory developments, and the evolution of technology and use cases within the space. For artists involved in the NFT space, this means staying agile and responsive to these changes. While the recent downturn may have been discouraging, the resilience of "blue chip" collections could suggest that high-quality, unique and sought-after artworks could still perform well despite broader market conditions.