Non-fungible tokens were carried away by the cryptocurrency crash as sales hit a 12-month low in June.
NFTs give ownership of a unique digital item – often a virtual work of art – to someone, even if that item can be easily copied. Ownership is recorded on a decentralized digital ledger known as a blockchain.
NFT sales totaled just over $1bn (£830m) in June, according to crypto research firm Chainalysis, their worst performance since the same month last year when sales were 648 millions of dollars. Sales peaked at $12.6 billion in January.
“This decline is certainly related to the broader downturn in crypto markets,” said Ethan McMahon, economist at Chainalysis.
“Times like this inevitably lead to consolidation within the relevant markets, and for NFTs, we’re likely to see a pullback in terms of collections and types of NFTs gaining prominence.”
The cryptocurrency market, worth around $3 billion last November, is now worth less than $1 billion.
NFTs rely on a blockchain – the decentralized ledger first used by Bitcoin to track cryptocurrency ownership – to record who owns them and allow them to be traded. Most are based on the Ethereum blockchain, which is maintained through a carbon-intensive system called proof-of-work.
At its peak, the NFT market attracted colossal sums, including $2.9 million for a token from Twitter co-founder Jack Dorsey’s first tweet. Digital collage by visual artist Beeple sold for $69 million; the main token of the “play to win” video game Axie Infinity has reached a total value of $9.75 billion; and Coca-Cola raised over $575,000 selling digital items such as a custom jacket to wear in the Metaverse.
According to data from Chainalysis, NFT sales peaked in January. In April, an attempted sell on the Dorsey NFT was abandoned when bids hit $14,000.
However, according to DappRadar, a company that tracks blockchain-based NFTs and video games, demand for so-called blue chip NFT collections has held steady.
The price of Bored Ape Yacht Club’s cheapest NFT is down just 1%, to $90,000, in the past month, according to DappRadar’s head of research Pedro Herrera. “Blue chip collections perform much better than the vast majority of NFTs,” he said.
NFT sales hit $40 billion last year, and the 2022 total has already surpassed that figure, at more than $42 billion, according to Chainalysis. January and February sales have accounted for more than half of the 2022 total so far.
The cryptocurrency market came under pressure due to volatility in broader stock markets, fears over rising inflation and rising interest rates, which dampened appetite for assets riskier, including tech stocks and digital assets.
Confidence in crypto assets was also shaken by the collapse of Terra, a so-called stablecoin whose value was supposedly pegged to the US dollar, and problems at crypto-related financial institutions such as Celsius Network, a lender who has taken a break. withdrawals.