After Bitcoin showed the world what was possible with decentralized finance, we were hit by a wave of new blockchains and technologies, all clamoring for our attention. What stood out from the rest were NFTs (non-fungible tokens), thanks to the many applications the community has found for them.
From video games to art pieces, NFTs were showing up everywhere on the market, with many users making money trading them. Coming from that high, it’s shocking to a lot of users now that NFT prices seem to be going down.
NFTs are essentially pieces of data stored on the blockchain. Each one is distinct and hardwired to store its history of ownership and related transaction records.
NFTs have become one of the most popular entry points into the crypto space in recent years. What helped was the popularity of crypto games, which allowed users to make extra money by playing and earning NFTs. These in-game NFTs could then be sold on the market, boosting both the popularity of the game and giving players a reason to keep playing.
NFT prices are crashing
Now, let’s get to the meat of the matter—falling prices in the NFT market. The reason that the community is concerned about the market is that average NFT prices are falling; from an average of over $6,800 USD in January, NFT prices in March averaged below $2,000 USD—a 70% drop.
This, understandably, has gotten a lot of NFT holders worried about their investments. The general fear now revolves around whether the market is in the middle of crashing or if, worse, it already has.
Why are NFT prices down?
Let’s take a look at one possible reason why NFT prices are down. The price drops that affected not just NFTs, but Bitcoin and other assets as well may be attributed to the recent spate of new regulations. The U.S., for one, has been introducing new laws regarding the regulation of cryptocurrencies in general. This has undoubtedly impacted the NFT space as well, since it also operates on blockchain technology.
This can happen each time a government decides to place some attention on the crypto space. Bitcoin, and all the succeeding blockchains, were developed with the goal of decentralizing finance. If governments participated in regulating cryptocurrencies, a large portion of the community would understandably react negatively.
How emotions can get in the way
This describes a similar situation that many see in Bitcoin investments. In fact, users even have a tool for this now in what’s called the Fear and Greed Index. This index acts like a social thermometer, helping users gauge the mood influencing the community.
For NFTs, this might be a moment we would describe as a period of extreme fear. This would entail that prices are down because users are trading their assets for other crypto or diverting their currencies into fiat money.
Others might find that this is the perfect opportunity to buy more. Of course, not everyone would have the liquidity for added investments so, like others in the past, many are turning to HODLing to avoid realizing their losses.
Is this the end for NFTs?
As we mentioned before, it helps if you can look at things from a different perspective. When we compare NFT growth to its current low, we can safely assume that this isn’t the end for the NFT market. There is still so much for the community to explore with NFTs. Even now, corporations are looking into how they can develop their own NFTs for the upcoming Metaverse.
What we need to understand about the world of cryptocurrencies and their blockchains is that both of these technologies are still relatively new. No one can accurately predict what will happen in the future. If you think about it, this is what is most rewarding yet most worrying about the crypto space—you might face a lot of risks, but the rewards can be just as plentiful.
Looking beyond NFTs
The potential of NFTs is something that we’ve yet to fully realize. With that in mind, how can we confidently say that we can predict where it’s going? If your concern is about financial security, the best way to keep your investments safe is to stay updated with what’s happening in the market.
Of course, for those looking for a little more peace of mind, diverting your investments towards BTC may be your best option. While it may still see some infrequent dips, its rate of growth over the past decade has convinced a lot of us of its worth. It’s here to stay, and trading BTC right here at Paxful is one of the best ways to get started with your journey.