Following the shock in the cryptocurrency and stablecoin market, the NFT market saw a sharp drop in volumes between February and April.
Temporary depression or the bursting of a bubble? The market for certified digital objects (“NFT”), very thriving since last year’s eruption, has just come to a sudden standstill and, according to specialists, now needs to improve to attract the general public and last.
Decrease in spending volume by 75% between February and mid-April
After generating $44.2 billion in 2021, “NFTs” (“Non-Fungible Tokens” or “non-fungible tokens” in French), these unique digital assets authenticated on the blockchain (or “blockchain”) – the technology that serves as the basis for cryptocurrencies such as bitcoin in particular – reported a 75% drop in spending volume between February and mid-April, according to the firm Chainalysis.
Symbol of the mini-crash: the NFT’s first-ever tweet in history, bought for nearly $3 million in 2021 and auctioned again on April 7. The owner expects $48 million, but for now the best offer barely exceeds … $20,000.
However, sales of virtual land in “Otherside”, the “metaverse” (digital universe) of the “Bored Ape Yacht Club”, the most famous club of “NFT” holders, reached several hundred million dollars in 24 hours in early May. †
According to Molly White, founder of a specialized site that identifies scams in the world of cryptocurrencies.
So, fashion effect aside, what basis can we rely on to define a “fair” price that everyone can understand?
Rather than “utility,” it is the “status” conferred by owning an “NFT” that seems to establish its worth, Molly White continues. The “NFT” available in some versions, such as the “Bored Apes”, allow access to very closed groups and are therefore the most expensive.
The crypto artist “Louis16art” offers to rely on the reputation of the author, the identity of the previous owners of the “NFT”, the quality of the work and the technique used, some of which are more demanding than others.” others.
In particular, other specialists advocate the creation, in the image of what exists in traditional art, of a database intended for novice buyers and provided by digital art specialists.
Problem: These assets are usually sold on “Opensea”, a deregulated marketplace. “But as soon as you have a new technology, you immediately have fraudsters on the lookout,” emphasizes AFP Eric Barbry, a specialized lawyer affiliated with the Racine office.
For example, in January, the platform revealed that 80% of the free “NFT” transformed images on its network were fake or stolen. “Opensea is a huge project, we don’t know what we’re buying there,” said Olivier Lerner, co-editor of the book “NFT Mine d’or” with Sophie Lanoë.
For Molly White, the market will fail to attract the general public without stronger “regulation” and “consumer protection”, even if increased scrutiny threatens to diminish the interest of this market, hitherto based on a strong lure.
“It’s the Wild West”, Sophie Lanoë summarizes, for whom the explosion of the bubble is an opportunity to start again “on a healthy basis”. “As long as we don’t have a specific law, we have to adapt the ‘normal’ law to NFTs”, warns Eric Barbry, for whom a regulatory evolution will take place “because of the maturity of the sector and its development “.
Aside from the security flaws and lingering legal “holes” that could deter the acquisition of “NFT”, how to simplify its purchase, still complex for a non-tech savvy public to understand? “Nobody understands it, but everyone loves it,” Olivier Lerner wants to believe.
For example, to help this market, “it is enough that the platforms become easily accessible,” by not asking for a specific portfolio for each type of digital asset, he suggests.