By Hannah Parker
The Wall Street Journal published an article at the beginning of May that shook up the NFT market: “NFT sales are flatlining: Is it the beginning of the death of NFTs?” This has caused some concern and raised questions about where the market is heading and if NFTs can still be a viable source of income.
What are NFTs?
In short, NFTs can be described as unmodifiable digital assets. They can represent artworks, music pieces, or real-life objects. Recent claims of NFT sales falling have been widely refuted. On-chain data from Dune Analytics’s dashboard shows that the NFT market remains strong due to ongoing developments in their utility. This data also shows that NFT transactions and users are significantly higher than reported by Nonfungible (the resource used in the WSJ Article).
Are NFTs Valuable?
NFT collections have three main pillars that help to build their value: community, culture, and utility. NFT collections can have multiple aspects or one aspect. The most famous examples are some of the best. Bored Ape Yacht club is the best example of an active community. Both CryptoPunks and Generative art (Artblocks), have promoted NFTs within the cultural sphere. The utility of gaming NFTs is a great indicator of how innovation can happen in this space.
Although the NFT market is volatile, there are still opportunities. Investors can use volatility to create strategies such as buy low, sell high which could lead to astronomic returns. As stated by the developers of the reputable automated crypto trading tool, Bitcoin Method, “A volatile market is a great place to filter out the weakest holders and projects”.
NFT creators recognize that customers are the most important part of marketing and have begun to create more engaging utilities. Entertainment and travel companies that sell NFT tickets are a prime example. Customers can easily exchange tickets with them without needing to contact customer service.
NFTs Depend Heavily on Interoperability
NFTs are a great tool because they can create community and offer access to perks both online and in person. As metaverses and NFTs become more complex, interoperability among metaverses will become as important as their utility in real-life.
Interoperability is key to the success of the metaverse, which mirrors the real world. The metaverse, which is the integration of virtual worlds without borders, aims to create fluid socio-cultural interactions beyond our physical world. The metaverse is more inclusive and will provide more variety and utility. Interoperability will increase the utility and bring a seamless experience to users.
Are NFTs Here to Stay?
NFTs offer a platform that allows people who don’t have the financial skills to become wealthy and enter the formal financial system. This is evident in NFTs that are based on play-to-earn games like Axie Infinity. They are growing in popularity.
The future of NFTs will go beyond gaming and art. NFTs can be used as proof of ownership, licenses, social status, exclusive access and certificates of authenticity.
There are pros and cons to trading and investing in NFTs. There are many arguments in favor and against them. However, one thing is certain: they will not be going away. So expect the NFT market size to increase, but don’t fall for the hype.
You need to decide how much you are willing to expose yourself to NFTs. Experts agree that long-term investors are better off limiting their exposure to NFTs to less than 5% and not at the expense of meeting other financial goals.