NFTs, Cryptocurrencies Can Still Survive As Part Of The Cycle

Without a question, individuals who have delved into the Nonfungible tokens (NFTs) area have had a profitable two years. According to crypto data firm Chainanalysis, trading in this new currency peaked over US$40 billion last year, and its 2022 statistics have already surpassed that level at more than US$42 billion.

For those unfamiliar with this emerging asset class, NFTs are transferable digital assets written on the Ethereum blockchain that can take the shape of works of art, movies, or photographs. The word entered the public consciousness last year and has since piqued the interest of both seasoned and inexperienced investors.

A collage by digital artist Beeple, which sold for a record US$69 million at a Christie’s auction, was one of the most talked about transactions. Other famous transactions include collections from Bored Ape Yacht Club (BAYC) and CryptoPunks, both of which had large celebrity and KOL followings.

Despite increasing influence through media presence and endorsements, NFTs and the larger cryptocurrencies have come under attack as a result of instability in the broader financial markets, where sentiment is gloomy. Rising inflation and interest rates have hampered investors’ desire for riskier investments such as technology stocks and digital assets. The recent demise of TerraUSD and Luna, two stablecoins tethered to the US dollar, has increased skepticism about the nature of crypto assets. Furthermore, the collapse of hedge firm Three Arrows Capital breeds even more skepticism in the crypto sector.

“Crypto winter,” is likely the most commonly heard phrase among cryptocurrency speculators. According to CNBC, the whole value of cryptocurrencies has fallen, wiping off almost US$2 trillion from the market. Bitcoin, the world’s top digital currency, has lost over 70% of its value since reaching an all-time high of US$69,000 in November 2021. NFTs are also falling in line with the broader downward trend, with Bloomberg reporting that sales fell below $1 billion in June. OpenSea, the largest NFT marketplace, has seen its sales volume decline by 75% since May, prompting the firm to cut 20% of its workforce in an effort to save expenses.

With several obstacles, many are skeptical that the NFT market would recover from this trauma. In commercial terminology, the market is stated to be experiencing a consolidation stage in order to address the “errors” that were made. Oversupply appears to be the most serious issue that has to be handled among the numerous critical issues. This catastrophe may have a silver lining in that the inbuilt corrective methods filter out NFT initiatives that lack value and promise.

The days of investing in NFTs only for their visual appeal are long gone. Investors nowadays are more picky about what constitutes a solid investment, and one trend that has evolved as a result is a renewed emphasis on utility. To complete the link between the real and virtual, a tangible consequence must be provided in conjunction with the purchase of an NFT. The primary differentiating factor in the performance of blue-chip initiatives such as Bored Ape Yacht Club (BAYC) is community building.

Aside from purchasing an NFT, investors get access to an elite circle that includes celebrities such as Eminem, Paris Hilton, and Jimmy Fallon, and the token functions as a membership card that grants members-only privileges. And it’s the added “goodies” that make it appealing. For example, NFT holders have complete marketing rights to their Bored Apes, which means they may be used to start a product.

Apart from adding usefulness to NFTs, it is also a good idea to investigate their future possibilities. As the industry matures, more research is being conducted to fully realize the benefits of these tokens. In a typical stock market, investors consider not just the utility of the firms against the backdrop of present demand; clever investors hedge their money on the future of these companies in order to acquire a first mover advantage.

For example, in the early days of Web 2.0, firms such as Meta (later Facebook), Google, and Twitter faced the same challenges that the NFT markets are now confronting. These tech equities were pitted against well-known names such as JPMorgan Chase, Goldman Sachs, P&G, Ford, GM, and others. However, in today’s world, the former are dominant and sought for by many. This is similar to NFTs, and if confidence remains high, the market should be able to navigate these turbulent waters and enjoy calm sailing.

True, the NFT market is experiencing one of its darkest moments since its existence, but this also gives a chance for producers to rediscover what these tokens can achieve and use these lessons to avoid potential mistakes in the future. On a larger level, the situation with cryptocurrencies is part of an economic cycle, and if investors can weather this storm, better days will hopefully be ahead.

source: retroworldnews.com

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Created on Jul 23rd 2022 04:58. Viewed 211 times.

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