NFTs plunge in value as crypto sells off
NFT values are plunging alongside traditional crypto, with one expert saying this is just the latest development in the ongoing ‘crypto winter’ saga.
The floor price, or lowest price NFT can be purchased, of so-called blue chip NFT Bored Ape Yacht Club has dropped 14% in the last 24 hours, while Mutant Ape's floor price is down 16%, according to Nansen. Meanwhile, Otherdeed for Otherside's floor price is off 20% in the last 24 hours.
The slide comes as bitcoin and other cryptocurrencies shed 10% or more on Monday on increasing expectations of more aggressive Federal Reserve rate hikes and, according to one expert, serves as a reminder that retail investors should exercise caution before diving into volatile non-fungible tokens.
“With any investment opportunity, retail investors should not get too carried away when looking into NFTs,” William Je, CEO of Hamilton Investment Management and Founder of Himalaya Exchange, a global digital crypto exchange, told Yahoo Finance. “Blue chip NFT collections such as Bored Ape Yacht Club are also experiencing a downturn as the minimum price of the NFT dropped below $200,000, signs that even the most sought-after collections are beginning to slide.”
NFTs have been falling in value this year overall, as sales have trailed off. Coming off its hottest year yet in 2021, NFT sales volumes plunged nearly 50% in the first quarter this year with resale profit volume down 3%, according to a quarterly report by NonFungible, which tracks NFTs. The slowdown in the volume of buyers and sellers comes as the collectible market has become saturated with NFTs. As of February, 1.2 million NFTs have been minted, according to blockchain analytics company Nansen’s quarterly report.
Je cautioned it’s important to remember that NFTs are still a young and largely unknown market and investors are tightening their investment belts across the board.
“We shouldn’t be too quick to pronounce the NFT market as dead on arrival,” Je said. “It remains an emerging market which is currently entering a cooling-off period, often seen after an initial boom.”
He added that as the metaverse evolves and adoption becomes more widespread, there will likely be more investment as well as knowledge and understanding of the space.
For NFT expert and founder of Apocalyptic Apes, Bill Starkov, a crash like Monday’s offers an opportunity.
“I use this as my Black Friday to go shopping,” Starkov said. “One down market day in the NFT space is like a year in real life. These corrections are super healthy. It’s good for the economy for people to take profits. What happens is that people panic, but then there are huge recoveries instantly.”
When buying NFTs, Starkov advised believing in the founders behind the project and looking at their track record. He said prospective buyers should join an NFT community, but don't buy in right away and don't give into the FOMO. When you buy in, Starkov advised holding and not flipping.
“The best way for NFT holders to capitalize on the IP rights of their NFTs is by holding their NFTs and allowing the NFT project to develop,” he said. “I think the worst thing you can do is keep flipping your NFTs, because you'll miss out on the opportunity to have access to IP rights you can capitalize on as the project turns into something big, depending on what it is.”
Starkov believes NFTs will rise in value, with new prospective buyers coming into the NFT space.
“New wealth is coming into the NFT marketplace,” he said. “There are big Web 2.0 companies who are joining forces with some of the big NFT collections. Once that happens, it becomes a massive option.”
Binance’s head of NFTs, Helen Hai, that the real value creation for NFTs hasn’t arrived yet and expects more volatility as NFTs evolve and mature. She said more education is needed to understand the risks and that not all NFTs offer value.
Jennifer Schonberger covers cryptocurrencies and policy for Yahoo Finance. Follow her at @Jenniferisms.
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