Why the value of NFTs dropped dramatically
NFTs (Non-Fungible Tokenfor its acronym in English) have had a great boom, however, a part of these have suffered a decline in market valuefailing miserably and leaving everyone wondering why this is.
According to a report from Bloomberg, a third of NFTs are worth nothing and another third are traded cheaplyso it could be said that more than half of these are failing.
Many of them are based on Ethereum and are being traded on the platform Open Sea. Although most crawl on the ground, there are exceptions like Bored Ape and CryptoPunk that have managed to gain a foothold in their customers and market.
Business Insider notes that only 1% of NFTs were traded for more than $1,500, while 75% sold for less than $15.
Note that to find out the selling price of an NFT There is a model that considers 3 factors:
– Visual features
– Previous NFT sales
– The popularity of buyers and sellers
Which is related to the fact that the NFTs that have value have been bought or have the occasional investment of world-class personalities such as Madonna, David Backham or are sold to social movements such as the Ukrainian government. Other than that, most are worthless.
These factors are what determine up to 70% of the variability of NFT prices. However, it is still not entirely clear why the non-fungible token business has been showing a significant decline since September of last year, according to figures from Dune Analytics.
In a report of Nansen, the number of NFT buyers was in February and although there are collections that continue to have a high value, the decrease in sales indicates that the public has quickly lost interest in acquiring one of these pieces.
According to WhaleShark, consulted by Xatakaone of the largest holders of NFT, this effect could be assimilated with the Initial Coin Offers (ICO) bubble in 2018, where the money initially flows fast until they realize that the ecosystem is full of “bad apples”.
The ICO was a financing mechanism that uses blockchain, the technology behind Bitcoin or NFTs, to raise funds through the sale of new crypto assets created by a company.