NFT sales hit 12-month low after cryptocurrency crash

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Non-fungible tokens have been dragged down by the bitcoin meltdown, with sales hitting a 12-month low in June.

NFTs provide someone ownership of a one-of-a-kind digital item, frequently a work of virtual art, even though that thing is easily replicated. A blockchain is a digital, decentralized ledger that records ownership.

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According to the crypto research firm Chainalysis, sales of NFTs were slightly over $1 billion (£830 million) in June, their weakest month since the same month last year, when sales totaled $648 million. In January, sales peaked at $12.6 billion.

Ethan McMahon, a Chainalysis economist, says the "decline is due to the broader slowdown in crypto markets," adding that “times like this inevitably lead to consolidation within the affected markets, and for NFTs, we will likely see a pullback in terms of the collections and types of NFTs that reach prominence.”

The cryptocurrency market, which was valued at almost $3 trillion in November, is now worth less than $1 trillion.

NFTs rely on a blockchain – the decentralized ledger pioneered by bitcoin to monitor ownership of the cryptocurrency – to track who owns them and allow them to be exchanged. Most are built on the Ethereum blockchain, which is powered by a carbon-intensive technique known as proof of work.

At its peak, the NFT market was garnering record-breaking sums, including $2.9 million for a token representing Twitter co-founder Jack Dorsey's first tweet. A digital collage by visual artist Beeple sold for $69 million; the primary token for the "play to earn" video game Axie Infinity was worth $9.75 billion, and Coca-Cola generated more than $575,000 by selling digital things such as a customized blazer to be worn in the metaverse.

NFT sales peaked in January, according to Chainalysis statistics. An effort to sell on the Dorsey NFT in April was abandoned when bids reached $14,000.

According to DappRadar, a service that studies NFTs and blockchain-based video games, demand for so-called blue-chip NFT collections has kept steady.

According to DappRadar's head of research, Pedro Herrera, the price of the cheapest NFT at the Bored Ape Yacht Club has dropped by only 1% in the previous month, to $90,000. “Blue-chip collections are performing vastly better than the vast majority of NFTs,” he stated.

According to Chainalysis, NFT sales topped $40 billion last year and are expected to exceed $42 billion by 2022. So far, sales in January and February have accounted for more than half of the total for 2022.

The cryptocurrency market has been impacted by volatility in the broader stock markets, as well as concerns about increasing inflation and increased interest rates, which have reduced the desire for riskier assets, such as tech stocks and digital assets.

The collapse of Terra, a so-called stablecoin whose value was meant to be fixed to the US dollar, has also undermined faith in crypto assets, as have problems at crypto-related financial institutions such as the Celsius Network, a lender that has suspended withdrawals.