Non-Fungible Tokens (NFTs) have emerged as the latest craze to engulf the crypto world over the past 12 months. The process of storing and owning a unique (non-fungible) digital asset via blockchain technology has seen the industry capture the interest and disposable income of many.
However, there are fears that this new and exciting world consisting of โbored apesโ, GIFs and cartoon heads has already reached its peak. One of 2021โs most high-profile NFT sales, Twitter Co-Founder, Jack Dorseyโs first-ever tweet, sold for $2.9 million. However, as of May 2022, the infamous tweet is now valued at a fraction of its initial sale price โ as little as $10,000, according to a recent report byย CNBC.
According toย William Je, CEO of Hamilton Investment Management Ltd and Founder ofย Himalayaย Exchange, a global digital crypto exchange, retail investors should exercise caution before diving into the volatile and largely unknown world of NFTs.
Je explains: โThe NFT industry remains a young and unpredictable ecosystem. We have seen many high-profile celebrities and sportspeople over the last 12 months flaunt their digital taste and wealth through NFT collections. However, blue chip NFT collections such asย Bored Ape Yacht Clubย (BAYC), are also experiencing a downturn as its floor price (the minimum price of the NFT) dropped below $200,000 โ signs that even the most sought-after collections are beginning to slide.
โFollowing the crypto marketโs recent downward trend, the hype around NFTs appears to have failed to protect it from following the same fate.โ
Je continues: โWe shouldnโt be too quick to pronounce the NFT market as dead on arrival. It remains an emerging market which is currently entering a cooling off period, often seen after an initial boom.
โThere is already an abundance of money circulating the NFT industry, with new collections expected to arrive from blue chip NFT brands and mainstream influencers. However, during a time when financial belts are being tightened across the country, it is clear to see why a lot of people are shying away from the exotic and risky world of NFTs.โ
Although NFTs have been in circulation for several years, the industry exploded into the mainstream during 2021 and now boasts a market size of $3 billion. Recentย researchย suggests that the NFT market is expected to rebound from its current downtrend and by 2027, is expected to be worth $13.6 billion.
Je continues: โPeople have gained an appetite for the likes of digital art, it has become a status symbol for many of us to update our social media display pictures with NFTs. The unique and non-fungible element of NFTs has successfully drawn so many towards its orbit.
โOur ever-deepening venture into the metaverse and its virtual reality will also spell good fortune for NFTs. As the virtual universe develops, and its capabilities continue to grow โ NFTs are expected to form a key foundation and drive its economy forward in the near-future.
โFrom purchasing digital art, video games, online real estate or anything else which captures the imagination โ NFTs will no doubt be at the centre of this exciting new reality.โ
Je concludes: โHaving sparked plenty of conversation and investment last year, we are now seeing NFTsโ first downswing, placing even more scepticism upon the industry from commentators.
โWhat is important to remember about NFTs is that it is still a young and largely unknown market. As the metaverse evolves and adoption becomes more widespread, we will likely see not only greater investment, but also knowledge and understanding being poured into the ecosystem.
โWith any investment opportunity, retail investors should not get too carried away when looking into NFTs. At a time when households are under so much financial pressure, it is critical that individuals do not fall foul to the hype and see the industry as a get rich quick scheme.
โWe shall have to see how the NFT market, and its key influencers handle its first hurdle over the coming months. Whether or not we see the same highs as 2021 will remain to be seen. What is clear is that NFTs will likely play an integral part in the future of the metaverse.โ
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