What happened to NFTs?

This short article is an attempt to provide a peek into the hype of Cryptos as a whole with keeping NFTs at the centre point of view.

Is NFT still worth the hype or did it lose its shine? The picture seems to get clearer that it has been losing its shine, in public domain and in stats as well.

The Peak Of Non-Fungible-Tokens

Covid-19 period has been at its early mid stage, and the flask of AI and Blockchain has started heating up. As Covid made physical world apparently shut to access, digital world witnessed a great inflow of information, data and innovation. From Generative AI, Cloud computing, Blockchains, everything was overwhelming to the business ecosystem to cope up with considering their restricted outwardly access to world.

In this heat, Crypto currencies started getting the heat. How? factors that affected this blowout were many, some were ;

• Digital realm being the only free to access than the outer world.
• Decentralized systems especially cryptos got backed by prominent intellectuals and billionaires on social media platforms.
• Meme coins like Doge coin saw an unexpected rush as Elon Musk backed it along with the Bitcoin.
• Countries like USA paid grants for covid for sustaining household expenses added to surplus spending of households. (As of today, $1 Trillion USD of grants still remain unspent as per Bloomberg reports.)

These with many factors made people believe Crypto being the new gold mine. Block chains are famous for their security. Some people thought why not make digital art exclusive to a blockchain, thereby making it rare.

Note, that digital art wasn't the thing that was selling. It was its apparent scarcity. Just like collectibles. Such artworks, tied to a unique token on blockchain became NFTs.

Solely traded in crypto currencies, bidding on it in crypto currencies made it more prone in siphoning off more money than usual global currencies. Why? Because crypto currencies are 10 times more volatile than global currencies. Such extreme risks with the trades is often tried to be compensated with higher and higher returns on assets (NFTs in this case).

Just to give an idea, before 2020, average users of NFTs and its platforms were close to 55,000 users.

It is worthy to note that the spike in users of NFTs came in right along the timeline when billionaires, VCs, were backing NFTs on Twitter (now X).

VCs were in the mood to surf the wave and they did! From 110 million USD fundings in 2020, it went up to 4500 million USD in fundings in 2021 alone. Question that prevails is that did VCs surf 'safely'? I guess only they know.

Now coming to today, NFTs have been there, but today as number of traders became a handful, already purchased NFTs as assets are now tied down as a low liquid asset. Abscence of sufficient trading activity has now put high valued NFTs holders at a sweat point.

Will there be another wave?

Answering this question is easy as well as tough. With world focus being into Generative AI, cloud services; decentralised finance may see some attraction but highly skeptical.

World of finance today is governed by strict central authorities, trying to protect investors' money. Decentralised platforms are solely good for data transfers and cloud computing. Handling cash and funds seems bleak as of now due to not much of a greater interest in investors to go into it.

A surprise element that in India in 2022, 7% of total adults owned NFTs, largest in the world with Vietnam at 2nd position (Statista).

With frequent global disruptions, high inflation, emissions control and financial volatility in markets have added in to paralyse the NFT market by a significant margin. Asset management Companies (AMC) and asset reconstruction companies (ARCs) are still of the opinion along with policy makers and economists that De-Fi and NFTs are like auctioning markets in luxury segments for HNIs (High net worth Individuals) but in a digital world with no trust, accountability and liabilities.

This wave brought in many apps to float in the market which later on turned into frauds and eroded all of investors wealth. Volatility in Crypto market takes into account the trust as well.

Ending Note:

In conclusion, we cannot eliminate De-Fi entirely, it will be of use, though imperfect. Following quote explains this in resounding voice.

'Exams are not the best way to gauge an aptitude; but its the only way that we have to do it.'

So, such waves are ought to become more frequent in times to come as disruptions become the new normal. Remember, it was not the miners who made the most money in the Gold Rush, those who sold shovels did.

Surf the wave, but make sure you end up in a safe and sound condition.