Are NFTs Dead? No, They are Going Through the Usual Cycle

Non-Fungible Tokens (NFTs) became one of the best use-cases for blockchain technology early this year. Together with decentralized finance (DeFi), NFTs came to dominate in the industry. Now, as volume sinks, there are questions whether NFTs are now dead.

NFT volumes are sinking

NFTs are unique products that are distributed in the blockchain industry. By using distributed ledger technology, it means that it is impossible for it to be duplicated. A good example of this technology at work was when Jack Dorsey sold his first tweet as an NFT. 

NFTs have been embraced by all types of blockchain projects. For example, decentralized game developers like Gala have used these NFTs to boost their revenue. Similarly, a move-to-earn platform like StepN uses NFTs in its ecosystem.

After experiencing robust growth in 2021 and early 2022, NFTs have come under intense pressure lately. Data compiled by CryptoSlam shows that the monthly volume of NFTs peaked at $4.5 billion in August 2021. 

Similarly, the number of unique buyers rose to over 1.1 million in October 2021 while unique sellers peaked at over 800k. 

Recently, however, these numbers have faded. In November, the total NFT sales dropped to $534 million while unique buyers were 522k. Therefore, it is clear that the industry is in a negative trajectory.

This explains why NFT companies are getting embattled. The firm has announced a series of layoffs as the NFT winter continued.

Ethereum is still the biggest blockchain for NFTs as it processes over 80% of all products. It is followed by other popular chains like Immutable X, Solana, Cardano, and Tezos. 

Are NFTs dead?

Some analysts believe that NFTs are dying. However, in my view, I believe that the industry is rebalancing as the crypto industry goes through a major shakeup. This happens all the time when there is a major innovation. 

We saw that in the early 1900s when banks were new and many that collapsed. Further, in early 2,000s, we saw the collapse of the technology sector. Therefore, there is a likelihood that the NFT will need to collapse first before it goes mainstream in the future.

This collapse comes after a time when the sector was getting pumped. For example, several users paid millions of dollars for land sales in the form of NFTs. That growth was not sustainable from the word go. As such, the sector will need to rebalance before it rebounds.