NFTs hit by ‘Crypto Winter
Non-Fungible Tokens (NFTs) have emerged as the latest craze to engulf the crypto world over the past 12 months. The process of storing and owning a unique (non-fungible) digital asset via blockchain technology has seen the industry capture the interest and disposable income of many.
However, there are fears that this new and exciting world consisting of ‘bored apes’, GIFs and cartoon heads has already reached its peak. One of 2021’s most high-profile NFT sales, Twitter Co-Founder, Jack Dorsey’s first-ever tweet, sold for $2.9 million. However, as of May 2022, the infamous tweet is now valued at a fraction of its initial sale price – as little as $10,000, according to a recent report by CNBC.
According to William Je, CEO of Hamilton Investment Management Ltd and Founder of Himalaya Exchange, a global digital crypto exchange, retail investors should exercise caution before diving into the volatile and largely unknown world of NFTs.
Je explains: “The NFT industry remains a young and unpredictable ecosystem. We have seen many high-profile celebrities and sportspeople over the last 12 months flaunt their digital taste and wealth through NFT collections. However, blue chip NFT collections such as Bored Ape Yacht Club (BAYC), are also experiencing a downturn as its floor price (the minimum price of the NFT) dropped below $200,000 – signs that even the most sought-after collections are beginning to slide.
“Following the crypto market’s recent downward trend, the hype around NFTs appears to have failed to protect it from following the same fate.”
Je continues: “We shouldn’t be too quick to pronounce the NFT market as dead on arrival. It remains an emerging market which is currently entering a cooling off period, often seen after an initial boom.
“There is already an abundance of money circulating the NFT industry, with new collections expected to arrive from blue chip NFT brands and mainstream influencers. However, during a time when financial belts are being tightened across the country, it is clear to see why a lot of people are shying away from the exotic and risky world of NFTs.”
Although NFTs have been in circulation for several years, the industry exploded into the mainstream during 2021 and now boasts a market size of $3 billion. Recent research suggests that the NFT market is expected to rebound from its current downtrend and by 2027, is expected to be worth $13.6 billion.
Je continues: “People have gained an appetite for the likes of digital art, it has become a status symbol for many of us to update our social media display pictures with NFTs. The unique and non-fungible element of NFTs has successfully drawn so many towards its orbit.
“Our ever-deepening venture into the metaverse and its virtual reality will also spell good fortune for NFTs. As the virtual universe develops, and its capabilities continue to grow – NFTs are expected to form a key foundation and drive its economy forward in the near-future.
“From purchasing digital art, video games, online real estate or anything else which captures the imagination – NFTs will no doubt be at the centre of this exciting new reality.”
Je concludes: “Having sparked plenty of conversation and investment last year, we are now seeing NFTs’ first downswing, placing even more scepticism upon the industry from commentators.
“What is important to remember about NFTs is that it is still a young and largely unknown market. As the metaverse evolves and adoption becomes more widespread, we will likely see not only greater investment, but also knowledge and understanding being poured into the ecosystem.
“With any investment opportunity, retail investors should not get too carried away when looking into NFTs. At a time when households are under so much financial pressure, it is critical that individuals do not fall foul to the hype and see the industry as a get rich quick scheme.
“We shall have to see how the NFT market, and its key influencers handle its first hurdle over the coming months. Whether or not we see the same highs as 2021 will remain to be seen. What is clear is that NFTs will likely play an integral part in the future of the metaverse.”
*Himalaya Exchange and William Je are not currently invested in any NFTs at this moment in time