In a flashback to the ICO bust, NFT collection failures begin to mount

There's a Baby Baller for every Bored Ape and CryptoPunk, one of the thousands of NFT enterprises that fizzled out soon after their big debuts.

According to blockchain analytics firm Nansen, one out of every three NFT collections has basically expired, with little or no trading activity. Another third of tokens are trading for less than what issuers paid to mint them. Nansen looked at around 8,400 collections on the Ethereum blockchain, totaling 19.3 million distinct NFTs.

Long-time crypto observers are having flashbacks to the 2018 Initial Coin Offering (ICO) debacle, when regulators warned that thousands of digital tokens were likely unregistered securities and quickly became worthless. NFTs, like ICOs in their heyday, have become one of the hottest areas of the cryptocurrency world as speculators seek to profit from the soaring interest and prices for digital certificates of authenticity, which are most typically used to represent art or collectibles.

"The resemblance is remarkable," claimed WhaleShark, an unknown collector who is reputed to be one of the world's largest NFT holders. "Money is going towards space far too quickly and with far too little knowledge."

While celebrity purchases of Bored Apes for more than $500,000 kept the collection in the spotlight, overall NFT sales have recently slowed. According to Nansen, the 30-day sales volume is down 40% from the previous month. According to DappRadar statistics, trading volume on OpenSea, the largest NFT marketplace, has decreased by 67 percent in the last 30 days.
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According to industry insiders, the drop is more of an indication of frantic demand cooling than a bubble bust. NFTs are still being marketed for usage in a variety of applications, including video gaming and commerce.

"After the insane peaks of last year, the NFT market is stabilizing," said Gauthier Zuppinger, co-founder of the NonFungible markets data platform.

EL by Reza Milani, an Iranian visual artist, is a collection of 1,456 cartoonish people standing by their bicycles that sees almost no trading activity on OpenSea. There are 190 people who own NFTs. Then there's NBA player John Wall's Baby Ballers initiative. After their release, the all-star guard's collection of cartoonish graphics were instantly mocked for resembling imagery from famous video games and films.

NFTs' value can also decrease if the producers fail to devise a marketing strategy or if the collection is displaced by younger, flashier ventures. Many NFTs that are merely digital photographs, known as PFPs (profile pictures), are especially prone to price decreases.

"In the current market, there is a pump-and-dump cycle among PFPs, which is why the market is declining," WhaleShark explained. "New money isn't coming in fast enough to support PFP projects." "It's like a pyramid scheme."

Demand looks to be focused as well. According to Nansen, the number of recurrent purchases outnumbers newcomers by a seven-to-one ratio. Overall, the number of total NFT customers is up considerably from a year earlier, while the researcher discovered that the number peaked in early February. According to Nansen, on March 15, there were approximately 92,000 secondary transactions and approximately 22,000 sales of newly minted NFTs.

NFTs that have lost their appeal on trading platforms, like the rest of the art and collectibles sector, may still have a larger function.

"They're not dead," claimed Nansen engineer Javier Gonzalez. "You're still allowed to look at them." However, some collections do not trade, and no one is interested in them; they are only memories from the past."


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