Are NFTs Really ‘Worthless’?

Non-fungible tokens (NFTs) rose to fame in 2021 during an incredible crypto market bull run, with trading volumes peaking at over $3billion in July of that year.

But by 2023, that figure had slumped to just under $1bn. Following the two-year market decline, Rolling Stone magazine made the bold claim last September that NFTs “are actually — finally — totally worthless”.

But is this really true?

NFTs come back to life

After a long and difficult NFT winter, signs of life are beginning to show as 2023 draws to a close, with trading volumes and NFT floor prices returning to good health.

Driving much of this growth is competition between rival blockchains Bitcoin, Ethereum, and Solana.

Bitcoin NFTs, known as Bitcoin Ordinals, launched in January of this year and in the past 30 days alone, have reached sales volumes of approximately $750m.

A Bitcoin Ordinals project called Taproot Wizards recently raised $7.5m as a means of reviving development on the Bitcoin blockchain, so much so that they hope it can rival Ethereum and Solana NFT production.

Meanwhile, on 17 December 2023, crypto data analytics firm Messari recorded Solana surpassing Ethereum NFT sales activity, having grown an impressive 500% in the last three months.

Solana is an increasingly popular platform for NFT collectors and creators as it has very low minting and transaction fees.

NFT trading volumes rising again

According to data gathered by TheBlock, NFT trading volumes across all major chains have been rising steadily over the past three months. Volumes peaked at just over $500m in the second week of December 2023, the highest in just over a year.

Data from Dune displays a similar trend across the better-known NFT marketplaces and projects. Since the end of September, trading volumes have nearly doubled, suggesting a renewed interest from collectors and investors.

Data from CryptoSlam also shows a 70% increase in sales volumes and almost 10,000 transactions over the past 30 days.

Once again pushing over the $1bn mark and an average sale price of $187, it would seem that NFTs are headed for an amazing run in 2024.

The NFT winter

As you can see from the graph below, NFTs looked dead on paper. Between the second half 2022 and 2023, the slump in trading volume was no where near its lofty 2021 highs. Furthermore, the floor prices of top NFTs were also down, sometimes lower than their original minting price.

The NFT winter was upon us, and it wouldn’t be until late 2023 that we’d finally see the buds of NFTs blossom once more. That said, the NFT winter was brutal, and thousands of projects were left behind.

To the untrained eye, a graph like this would suggest the end of NFTs. But it’s worth noting that whilst volumes aren’t in the excesses of billions, they are still in the tens and hundreds of millions, which is still a lot. Compare this with the original crypto winter that took place between 2018 and 2021. Notice anything similar?

Just like the ‘Crypto Winter’ that followed the 2017 altcoin explosion, the NFT winter killed off hundreds of amazing and terrible NFT projects. Those who survived and held on spent those quiet years working away on their projects with hopes that someday, their winter would soon be over.

So what now?

After Bitcoin, Ethereum, and hundreds of other cryptocurrencies reached all-time highs in price, market cap, and trading activity, the market effectively collapsed. By the middle of 2018, over 800 cryptocurrencies were declared due to them having a value of less than one cent, which at the time would ironically place Dogecoin (DOGE) on the deceased list.

According to data gathered on Bitcoin Orbituaries from 99bitcoins.com, Bitcoin was declared dead 272 times by major sources between 2017 and the end of 2020. Naturally, NFTs have been the subject of intense scrutiny.

This was especially true after the Rolling Stone story was based on a report released by blockchain research community, dappGambl, which revealed that of 73,257 NFT collections, 69,795 of them had a market cap of 0 ether (ETH). The Rolling Stone piece failed to look at the conclusions of dappGambl, who wrote: “The NFT landscape has undeniably experienced a seismic shift from its 2021 highs.

“Yet, this evolving space is far from dead. As the market matures, NFTs are likely to increasingly pivot from mere collectibles to assets with tangible utility and significance. In this ever-evolving space, the future of NFTs will be shaped not by speculation, but by genuine value and utility that they bring to their holders.”

So are NFTs dead?

In short, no. But many are.

Within just a few years, NFTs have become one of the most fascinating and controversial aspects of Web3, but just as dappGambl suggests, it could only be a matter of time before NFTs find true utility and surge to mainstream popularity again.