These days one does not hear many breathless reports of new NFTs (non-fungible tokens) being sold for huge amounts and being touted by celebrities. There is a reason for this. This site has examined the state of the NFT market and found that they have crashed in value with most of them now worth nothing.
The hype around NFTs peaked in the 2021/22 bull run that saw nearly $2.8 billion in monthly trading volume recorded in August 2021. From this, NFTs captured the collective imagination worldwide with multiple news reports of million-dollar deals for sales of certain NFT assets.
People were excited about this new type of online asset and something of a goldrush appeared to start. Fast forward to today… and the NFT market is starkly different.
Data from the Block reveals a weekly traded value of around $80 million in July 2023, just 3% of its peak back in August 2021.
Using data provided by NFT Scan, we have compiled a comprehensive analysis of over 73 thousand NFT collections (73,257, to be exact) in order to identify key trends, assess the health of the market, determine the factors contributing to successful projects, and hopefully gain insights into the potential future trajectory of the NFT ecosystem.
The results were shocking, to say the least.
Of the 73,257 NFT collections we identified, an eye-watering 69,795 of them have a market cap of 0 Ether (ETH).
This statistic effectively means that 95% of people holding NFT collections are currently holding onto worthless investments. Having looked into those figures, we would estimate that 95% to include over 23 million people who’s investments are now worthless.
The author of this report says that supply of NFTs have greatly exceeded demand, leading to the crash. They also point out that there are greater costs than just the loss to investors because NFT production uses a huge amount of energy.
The minting process of NFTs involves certifying a digital asset as unique by making a transaction on the blockchain. Each minting consumes energy, just as any other operation in the digital realm does, though the amount of energy consumed by minting NFTs with little to no use case might be cause for alarm.
To give a sense of scale, our study identified 195,699 NFT collections with no apparent owners or market share. The energy required to mint these NFTs is comparable to 27,789,258 kWh, resulting in an emission of approximately 16,243 metric tons of CO2.
Those are some big numbers, so let’s contextualize that… 16,243,017kg of CO2 is 16,243 metric tons, which is equivalent to:
- The yearly emissions of 2048 homes – it’s 7.93 per home according to the EPA.
- The yearly emissions of 3531 cars – it’s 4.6 per car according to the EPA.
- The carbon footprint of 4061 passengers flying from London (England) to Wellington (New Zealand) – it’s 4 tons of CO2 per person according to Air New Zealand.
The author acknowledges that looking at the state of the overall NFT market may be unfair, like looking at the entire range of regular stocks on offer since many stocks are for low-performing companies and their prices are also close to zero. The state of top performing stocks like those in the S&P 500 index may be a better indicator of the state of the market. But even looking at the top NFT performers, there are problems.
A startling 18% of these top collections have a floor price of zero, indicating that a significant portion of even the most prominent collections are struggling to maintain demand.
Furthermore, 41% of the top NFTs are modestly priced between $5 and $100, which may signal a lack of perceived value among these digital assets.
Astonishingly, less than 1% of these NFTs boast a price tag of over $6,000, shedding light on the rarity of high-value assets even within the cream of the crop.
This is a complete departure from the million-dollar deals that were heavily reported during their boom.
These statistics not only underline the disparity within the top echelons of the NFT world but also serve as a stark reminder that, despite all the glitter and allure, genuine value in this market can be elusive.
The author of this report has not completely given up on NFTs though, and says they may have a future once all the hype is gone and they move on from just representing art and collectibles to having some practical uses.
Maybe. But I will continue to steer clear of them and the associated cryptocurrency markets.