The NFT (Non-Fungible Token) market experienced a major downturn after the excitement of 2021-2022. Let’s break down some of the key reasons:
Speculation Gone Wrong
People jumped into the NFT market hoping to buy low and sell high. But when the initial buzz wore off, interest faded, and prices plummeted. Projects that didn’t provide real art or value were hit the hardest.
Crypto Market Decline
The whole cryptocurrency market took a hit due to rising interest rates and various economic issues. Major collapses like those of FTX and Terra Luna added to the turmoil. Since NFTs often rely on cryptocurrencies like Ethereum, their values have dropped too.
High Costs and Oversupply
Trading NFTs on Ethereum became costly due to high transaction fees, which pushed many small investors away. OpenSea, the leading NFT trading platform, saw its trading volume drop by more than 90% from its peak.
Changing Views and Celebrity Disinterest
Celebrities like Snoop Dogg initially brought excitement to NFTs, but many lost interest or faced criticism for promoting something risky. Public sentiment shifted from excitement to skepticism, with many people labeling NFTs as scams.
Regulatory and Tax Concerns
Governments began closely examining NFTs for potential money laundering and tax evasion. The IRS and other agencies mandated that NFT profits be reported, discouraging casual traders.
Rise of Scams
The market became flooded with numerous low-quality NFTs, which decreased demand. Some projects turned out to be scams, where creators disappeared after making quick profits. High-profile fraud cases damaged trust across the entire market.
Lack of Real Value
Many NFTs promised exclusive access or gaming perks, but most failed to deliver. Without real value, they ended up as digital collectibles that lost their appeal.