The bear market has not only sent cryptocurrency prices plummeting. The NFT market also doesn’t seem to have taken off in the last few weeks and months. Few people are interested in NFTs at the moment. But could the bear market be a unique opportunity and should you invest in an NFT now?
In this article we take a look at the current situation around NFTs and whether it might be worth investing in a bear market NFT.
What are NFTs?
NFTs are so-called non-fungible tokens. These are digital objects based on the blockchain with a unique digital signature. In principle, this makes NFTs impossible to counterfeit and each digital object is unique. While cryptocurrencies based on the blockchain (e.g. Bitcoin) are fungible and thus can be reproduced, NFTs are non-fungible and cannot be copied.
In recent years, the NFTs have primarily taken over the digital art market. The impossibility of counterfeiting makes NFTs ideal for digital artwork. But NFTs have also become increasingly popular in other areas such as gaming. In some cases, NFTs have been able to fetch six- and even seven-figure sums when sold in the past.
What Happened to NFTs in the Bear Market?
In recent months and years, more and more people have wanted to invest in an NFT. In particular, the bull market in Bitcoin and other cryptocurrencies ensured that NFTs received more and more attention. Most NFTs are based on the Ethereum Blockchain. Furthermore, the Solana blockchain is often the basis of many NFT collections.
The great hype surrounding NFTs caused many prices to go through the roof. Several major artists (musicians, movie stars, etc.) released their own NFTs. But this hype seems to be dying down somewhat in 2022.
With the bear market, not only do cryptocurrency prices fall, but NFTs may also experience a drop in demand. An indication of this is given by the development of NFT trading volume on the largest NFT trading platform OpenSea. In the third quarter of 2022, trading volume suddenly collapsed after being consistently high in the second quarter.
Why did OpenSea trade volume drop?
In the chart below, we can see how much OpenSea trade volume fell in the third quarter of 2022:
The decline only came in the last few months. However, the bear market in cryptocurrencies started at the end of 2022. We therefore only see a delayed connection. However, it may well be that the lower interest in cryptocurrencies also leads to a lower interest in NFTs.
The high selling prices of NFTs were also justified by the rising prices of cryptocurrencies such as Ethereum or Solana. Furthermore, the demand for cryptocurrencies is now decreasing. Especially in the third quarter, there was little movement in the crypto market, causing interest to fall again. As a result, fewer people want to invest in an NFT.
However, there are other reasons why interest may have decreased:
- Of course, the hype about NFTs in the public has flattened out again. Following regular attention to NFTs, interest has increased in recent months.
- The concerns regarding high inflation and a possibly recession lets fewer and fewer people invest in a “luxury” like an NFT.
Why has it been worth investing in an NFT in the past?
The NFTs have been both collectors and investment objects in recent months and years. Once a digital artist has made a name for himself, his digital artworks have always been acquired by collectors at high prices. Like “analog” art collectors, these collectors are simply interested in a unique piece of art.
On the other hand, especially in 2021 and 2022, NFTs were increasingly seen as investment objects. Many individuals bought an NFT with the intention of selling that NFT at a higher price in the future. These speculations became especially popular when the prices of cryptocurrencies such as Ethereum and Solana rose massively.
Why are fewer and fewer people investing in an NFT now?
With the bear market, the demand for cryptocurrencies has decreased. Since NFTs are based on blockchains like Ethereum and Solana, it stands to reason that the demand for NFTs will also decrease. Because to buy an NFT on OpenSea, buyers obviously need Ether Tokens, which they use to pay for the artwork.
Furthermore, fewer speculators invest in an NFT. It may well be that the speculation has not yet been read in 2022, despite falling prices. Interest only fell in the third quarter, as can be seen from the figures at OpenSea.
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Are NFTs Dead?
With these numbers, many crypto enthusiasts are now wondering if the NFT market may soon be dead. It is clearly too early for such an assumption. Most importantly, declining interest in NFTs in a major marketplace presents a huge opportunity for smart investors.
We keep saying that the bear market is a great opportunity for investors to make big returns in the future. In this article, we provide the main reasons for this. We can also apply the same principle to the NFT market.
With declining interest in cryptocurrencies and NFTs, you may now be able to buy both cryptos and subsequently NFTs cheaply. In the future, the value of both your coins and your now purchased NFTs can increase extremely in the next bull market if you invest in an NFT now.
Is it worth investing in an NFT in a bear market?
The bear market is the time when a lot of opportunities arise for smart investors. Besides investing in cryptocurrencies, you should also consider investing in an NFT or even more artworks. If you were to hold these NFTs for the next few years, you can sell them again at a higher price in 2-3 years in the possible bull market.
The OpenSea trading platform is an ideal place, especially for beginners. It is the largest trading platform for NFTs and offers by far the largest selection of NFT collections. Above all, you are well protected on this platform against fraud.
Investing in an NFT can teach you very high returns in the future. It is of course possible that the NFT hype will not be repeated in the future and your NFT will not increase in value in the years to come. However, if you are willing to take some risks, you can reap big gains from NFTs in the future.
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