Bored Ape prices plung, but the NFT Market is headed for new heights
There is no denying the fact that nonfungible tokens (NFTs) have taken a hit in recent months. Digital asset market conditions have plunged, scams and hacks have become frequent events, and there is an increasing number of low-quality projects, pushing many to question the value of NFTs and their place in Web3 overall. Even popular projects like the Bored Ape Yacht Club have been hit by these factors, with floor prices dropping below $100,000 this year.
Over the last Cryptocurrency cycle, NFT Market sentiments have been largely correlated to and reliant upon the general Cryptocurrency Market. As technology and digital assets soared in valuation, it became easier for individuals and traders to justify speculating on the nascent NFT asset class — often paying exorbitant bonuses with the conviction that some tangible utility and value might be derived at a point in the future. Combined with the fact that NFTs, are relatively scarce and illiquid, in nature, it set up the perfect storm for dramatic price appreciation that fell even more dramatically back to ground.
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Market conditions are also tied to developments in the Digital Asset ecosystem, which include rampant scam and oversaturation in content, causing increased concern for parties already involved within this space, and reluctance for public and businesses that were looking to enter the space.
What is significant for us to realize is that this is a natural part of the NFT space is evolution. Over-speculation followed by reality-striking struggle is not only to be expected, but necessary for us to take action and remedy the current issues to ensure these Digital Assets can continue to grow and flourish.
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Frauds and hacks are, of course, harmful to projects and users participating in the NFT space. No creator should have their creation duplicated and sold under someone else’s name, just as no buyer should innocently fall prey to a hack or theft. Projects should not need to worry that a hack can take advantage of infrastructure susceptibilities and steal massive sums of money. Moreover, early followers do not need to fear that project leaders will either run out of working capital or simply abandon the project in early stages of the roadmap.
But what these security breaks do reveal is where the points of failure are in the NFT system, allowing us to work harder towards fixing them and avoiding them from happening in the future. They also prove an important point to Blockchain Technology projects: that they need to prioritize infrastructure and safety partners in order to be successful in the long term and prevent future financial losses. Additionally, companies and projects need to look internally on best way to protect users. They need to leverage open-source technology and develop features of their own that help to bolster the project’s security — OpenSea and MetaMask are taking steps to do just that.
Where frauds and hacks cause distrust and unease, the increasing number of low-quality projects has led to a general oversaturation in the NFT marketplace. People are tired of hearing about NFTs that have either no artistic worth and no tangible utility. In an over-crowded market, it becomes difficult to measure which projects or artistic collections are worth any money at all.
The silver lining here is that the NFT market is downturn is weeding out some of the lower-quality projects and collections. Projects will be forced to execute on their promises, pivot their strategies to remain competitive, and better cater to their consumers.
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For starters, NFT marketplaces will need to start curating artwork to ensure the highest quality pieces are not sunk out by the massive number of NFTs and duplicates being listed. They will also need to better align with evolving copyright and IP standards. Projects that are not purely focused on digital artwork will need to deliver real utility to consumers or other businesses in order to be successful in the long run. Utility can come in the form of ownership privileges, exclusive memberships, redeemable rewards, or entrance to communities of like-minded personalities.
And what is perhaps most important is that we have only begun to touch the tip of the iceberg with respect to the full potential of and number of use cases for NFTs. This highly disruptive token standard can and will support efficient and secure digital ownership rights of valuable assets. Ticketing for events and travel, undisputable forms of identification, and digital domain standards are among other exciting use cases which also include financial products, medical records, real estate and intellectual property (IP).
The challenges we are facing will be overcome and will result in a more innovative and safer ecosystem of sturdy projects that reshape our lives in new and unthinkable ways. Moreover, McKinsey & Company forecasts that the Metaverse would likely reach a valuation of $5 trillion by 2030. Guess what the building blocks to the Web3 metaverse are? NFTs. Little surprise, then, that another study forecasted that the NFT Market would reach $230 billion in value by 2030.
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Because NFTs represent digital ownership that is both undisputable and easily transferable, they will serve as digital identification or tickets for events in the Metaverse, act as a proof of attendance or payment, and act as proof of ownership for games, wearables, or digital real estate. NFTs will trigger all activities in the new digital economy within the Metaverse.
NFTs are laying the groundwork for the next generation of innovative products and services. As we continue to get through these growing pains of this nascent space, one thing is plentifully clear is that NFTs are here to stay.
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