A new type of digital asset, NFT, had been created and trading on the blockchain was made possible. They can be used to represent ownership or other rights to an item in a game, physical item, or digital good
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NFT became popular when Sina Estavi, a famous crypto entrepreneur, bought an NFT of former Twitter CEO, Jack Dorsey's first tweet for $2.9m in March 2021. A year later, he put it up for resale on NFT marketplace OpenSea, for $48m, and didn't sell although he had the highest bidder bidding for it at $6,800. This had given rise to surging demand for NFTs in the marketplace. Recently, a lot of happened in the NFT market, and one wonders what is causing the decline in the NFT market.
The decline in NFT sales and trade can be attributed to several factors such as;
People are moving to the next big thing
The hype for NFTs has died down and the value of these assets is now on the decline. The life cycle of hype which is a term used to describe how interest in a new product or service quickly dwindles after it is introduced to the market is reflected in the NFT space too. The attention span of individuals seems to be reducing year after year, so it’s no surprise that people are quick to move on to the next big thing.
When NFTs came people drove into it without understanding how it works and once they found out it's not one of the quick rich schemes, and that they needed to bring value for the worth of their digital assets, their interest diminished.
They are now moving on to something new and shining hoping to make that big break they've always dreamt of. What they fail to understand is that value isn't only attached to the NFT space alone, value is attached to anything someone is paying for whether it's in the crypto space or not. Until they come to terms with this, they will keep roaming around hoping to hit a big break without putting in any work.
Economic Factors
One of the major factors that affect the sale and trading of NFTs is the economic situation in a given country or region
And a lot of things happened in the crypto space recently that have affected digital assets too. The Terra plummeting, Celsius bankruptcy being one of them, and there's also a recent rise in inflation, sociopolitical uprising, etc...
With this, it can be seen that NFTs are not immune to the economic factors that affect other tradable assets. The trading volume of NFTs depends on the demand for them and the supply. When there is a high demand for a particular NFT, it will be more expensive than when there is a low demand for it. The same goes for supply; when there is a high supply of an NFT, its price will be lower than when there is a low supply of it(supply and demand).
Bear season
The crypto market has been experiencing a bear run, and the NFT market is no exception.
The bear run is always affecting the sales and trading of NFTs because in this market, the price of these digital assets goes down and it becomes more difficult to sell them at their original price or even at any price at all.
The Crypto bear market is not just affecting the price of cryptocurrencies. It has a ripple effect throughout the entire decentralized finance space.
Any positive take-out?
Regardless of what is happening in the decentralized space, the good thing is that the best projects, plans, and designs will continue to thrive. And investors will be scrutinized and more long-term oriented than they were in the past. We will have more use cases, utility, and fewer publicity stunts during this period. A lot of people will do more than just hodling and waiting. They will use this season to learn, innovate, and build lasting web 3 projects.
What's next for NFTs?
NFTs and cryptocurrencies are here to stay because there will always be a place for digital Currencies and digital assets to thrive. Web 3 is turning into a cornerstone for the digital economy and it's not going anywhere anytime soon. What we are experiencing is a natural up-down economic cycle, which soon comes to an end. While opening up doors that will help decentralized systems and economy to flourish.