Are NFTs Dead? Decoding the Hype and Spotting Dying Tech Trends

NFTs Have Kicked The Bucket

As of April 2024, the NFT (Non-Fungible Token) hype cycle has definitively met its fatal end.

These digital assets, which range from art and music to tweets and virtual real estate, once fetched millions and symbolized a new age of digital prosperity.

The initial surge in purchases during 2021 was largely fueled by the prospect of rapid gains rather than the inherent value of the NFTs, and as the market grew increasingly saturated, the value of NFTs sharply declined.

As a result, sales in the largest NFT marketplace, OpenSea, plummeted from over $4.87 billion in January 2022 to just under $300 million in the first quarter of 2023.

But what else led to such a crippling end to this over-promised technology? And what warning signs should you look out for in the next “big” technology to emerge?

Understanding NFTs: A Brief Overview

Non-Fungible Tokens (NFTs) represent a groundbreaking shift in the digital ownership of assets using blockchain technology.

Unlike cryptocurrencies such as Bitcoin or Ethereum, which are fungible, meaning each unit is the same as every other unit, NFTs are unique.

Each NFT has a digital signature that prevents them from being exchangeable on a one-to-one basis, which makes them non-fungible.

Examples of NFTs:

Digital Art: Perhaps the most famous example of NFTs is digital artwork. Artists like Beeple and Pak have sold pieces worth millions, marking a significant moment in digital art valuation. For instance, Beeple’s piece "Everydays: The First 5000 Days" sold for over $69 million.

Collectibles: Digital collectibles such as CryptoKitties, which are virtual cats on the Ethereum blockchain, allow users to buy, collect, breed, and sell unique virtual cats. Each CryptoKitty is an NFT, different in its design and value.

Music and Video: Musicians and filmmakers are increasingly using NFTs to monetize exclusive content. Kings of Leon, for instance, released an album as an NFT, offering buyers limited edition perks like special album covers and concert tickets.

Virtual Real Estate and Goods: In virtual worlds like Decentraland or The Sandbox, users can purchase land, buildings, or other items as NFTs. These assets are controlled by the user and can be developed or resold within the platform.

Sports Memorabilia and Moments: Platforms like NBA Top Shot allow fans to buy, sell, and trade officially licensed NBA collectible highlights. Each highlight is tokenized as an NFT, with varying degrees of rarity and value.

By tokenizing these assets, NFTs ensure verified ownership and scarcity, thereby potentially increasing the value of digital assets that might otherwise be easily replicated.

The Meteoric Rise of NFTs

Non-Fungible Tokens (NFTs) surged in popularity during the crypto boom of the early 2020s, with 2021 marking a pivotal moment in their ascent.

NFT sales volume reached a staggering $25 billion that year, showcasing a significant leap from just $95 million in 2020.

This spike was fueled by several high-profile sales, including Beeple's digital artwork selling for a record-breaking $69 million at a Christie's auction, which not only captured headlines but also signaled a new era for digital creators and collectors.

However, the explosion of interest also brought challenges, including market saturation, speculative trading, and concerns about environmental impact due to the energy intensive nature of blockchain transactions.

These issues began to cloud the initial excitement, leading many to question the sustainability and real value of NFTs as a long-term investment. And they were right to do so.

The Swift Decline of NFTs

As the initial enthusiasm waned, the NFT market faced a significant downturn. In 2022, the market saw a sharp decrease in both sales volume and the prices of NFTs.

But the bubble that seemed to continuously expand started showing signs of a slow puncture.

Many high profile NFT projects saw their value plummet as much as 70%.

But how?

Well, the market's saturation made it increasingly difficult for investors to discern potentially valuable NFTs from mere cash grabs.

Secondly, the broader economic downturn and tightening of monetary policy across global economies led to a decrease in speculative investments, which NFTs often represent.

This cooling trend forced the NFT community and potential investors to reconsider the intrinsic value and long-term viability of NFTs.

While some view this downturn as a market correction, we see it as a sign of a dying technology.

Warning Signs Of A Dying Technology

1. Innovation Slowdown: A noticeable reduction in the pace of innovation can be a strong indicator of a technology's decline.

This might be observed through a decrease in new features, updates, or enhancements in the technology's platforms or applications.

If tech companies or developers begin to shift their focus away from a particular technology or stop discussing future roadmaps, it might signal a lack of long-term viability.

2. Decreasing Media and Community Buzz: The level of excitement and engagement around a technology can often be gauged by its presence in media and online discussions.

A drop in media coverage, fewer mentions in tech forums, and declining social media discussions can indicate waning interest from both consumers and tech enthusiasts. This shift can be a precursor to a decrease in adoption and investment.

3. Market Withdrawal and Reduced Commercial Investment: When technology companies start withdrawing products or services related to a technology, or when there is a noticeable decline in new investments or startups entering the space, it's a strong sign that the technology may be on its way out.

This withdrawal often follows a realization that the market potential has been overestimated or that the technology cannot compete with more effective solutions.

The BMM Takeaway

NFTs initially made an enormous splash and gained massive financial traction, but ended up just losing people millions of dollars.

So in our opinion, you should try to hold off on any new and emerging technologies until they’re proven.

Sure, this could prevent you from cashing in from being an early adopter, but it also prevents you from losing all your money and ruining your whole life.

But ultimately the level of risk you want to take is up to you. Just make sure whatever you do to have a backup plan in case your investment doesn’t work out.