NFTs adversely impacted by cryptocurrency crash

In June, Non-fungible tokens (NFTs) reached the lowest point in a year after the cryptocurrency crash.

NFTs grant people ownership of digital items and record their ownership on a blockchain, a digital and decentralised financial collection.

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According to the crypto research firm Chainalysis, in June, its sales were reported as just over $1bn (£830m), their worst sales since June last year when the total was $648m. Sales then peaked in January at $12.6bn.

According to Ethan McMahon, a Chainalysis economist, the deflated result is related to the crash in the crypto markets and “times like this inevitably lead to consolidation within the affected markets, and for NFTs we will likely see a pullback in terms of the collections and types of NFTs that reach prominence.”

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The cryptocurrency market has fallen from $3tn last November to less than $1tn.

Most NFTs rely on the Ethereum blockchain, maintained through a carbon-intensive system, proof of work.

When it was in its best condition, the NFT market got large sums. Among these was the $2.9m sum for a token of the first tweet by Jack Dorsey, Twitter’s cofounder. Visual artist Beeple’s digital collage was bought for $69m. Furthermore, Coca Cola got more than $575,000 for digital items to be used in the metaverse and the video game Axie Infinity had a main token with a value of $9.75bn.

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Although an attempt to sell on the Dorsey NFT was quit in April when bids were at $14,000, according to DappRadar that tracks NFTs and blockchain-based video games, the demand for the so-called blue chip NFT collections has not decreased. 

Pedro Herrera, DappRadar’s head of research, told that in the Bored Ape Yacht Club, the cheapest NFT’s price has decreased to $90,000, by only 1%, saying that blue chip collections have much better results than most other NFTs.

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Chainanalysis shows that NFT sales went up to  $40bn last year and the 2022 total has exceeded this by going over $42bn, with January and February making up more than 50% of this year’s total sum as of now.

With the threats of rising inflation and interest rates, as well as instability across international stock markets which have many companies and individuals increasingly fearful of risky assets, the cryptocurrency market is facing difficulties.

Furthermore, the fall of trusted Terra with a value meant to be attached to the US dollar and crypto-related issues like that in the Celsius Network, faith in crypto assets has decreased.

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