NFT Weekly: The Popping of the NFT Bubble Has Been Declared Again, but Investments Keep Coming

Welcome to PYMNTS’ new weekly report on all things non-fungible token (NFT).

NFTs carrying art, video, audio and other media files have gotten a lot of hype thanks to some outrageous sales of collectable cartoon images that sell for six and seven figures, but they have also been embraced by a growing number of artists and musicians, sport leagues and businesses that want to do everything from use NFTs to sell songs to tokenizing financial assets.

As they are written onto blockchains, NFTs are immutable — they cannot be changed — and they provide a clear chain of ownership, establishing provenance. They can also be used to build metaverses, so they’re doubly hyped.

Without further ado, here’s a look at what’s happening in the NFT world this week.

For one thing, there is talk — again — that the NFT bubble, which started with a $69 million artwork and continued through multimillion-dollar 8-bit images of CryptoPunks, is about to pop. NFT sales are “flatlining” this year, with the daily average number of sales last week 92% lower than a September peak.

That’s according to The Wall Street Journal (WSJ), whose article wasn’t particularly well timed, coming on the heels of a pair of much-hyped NFT minting projects — more of those below — over the weekend that saw a huge spike in the number and especially dollars spent on NFTs.

Still, one-offs aside, WSJ has a point. With the exception of a couple of weeks in January, daily sales have been largely in the $10,000 to $20,000 range since November, when NFT sales collapsed even more than bitcoin’s 50% dive as the crypto bear market hit, according to NonFungible, a market tracking site whose numbers WSJ used.

See also: NFT Sales Show Signs of Slowing, Report Says

One big reason may be that blockchain-based play-to-earn game Axie Infinity is seeing a steep drop in user numbers — from a high of 63,000 to as little as 12,000 now, Decrypt reported. There are a couple of possible reasons for this, starting with the $625 million hack of the Ronin Network bridge, which was used by Axie Infinity players to trade their crypto for tokens useable in the game.

Read more: In $625M Hack, a Bigger Crypto Security Problem Is on Display

That would seem to likely turn off quite a few players. And in terms of transaction numbers, Axie was vastly ahead of every other NFT projects with about 15 million transactions for in-game items on NFTs that players needed to work for or buy to advance their characters.

There’s a growing backlash against play-to-earn games in which players — generally from developing countries — earn a living by “grinding” repetitive tasks in the game to sell the resulting items to players who don’t want to put in the work.

See more: Gaming’s Backlash Against NFTs Is Becoming Organized, Threatens Crypto Tokens’ Adoption

That ground-up movement that sees NFTs as a way to expand the pay-to-win game model many serious gamers see as unfair and destructive — particularly in first-person shooters and other games with peer-to-peer (P2P) combat — has forced more than a few studios to at least back off adding NFTs to games.

Piling In

That downturn hasn’t affected the interest in opening new NFT marketplaces to challenge the leader, OpenSea. In a Tuesday (May 3) blog post, large U.S. exchange Kraken announced Kraken NFT with a waitlist for prospective minters and sellers. Among other features, it will include listing NFTs in various fiat currencies rather than cryptocurrency tokens like ether, which OpenSea and a number of others use.

Nasdaq-listed Coinbase’s own Coinbase NFT marketplace flopped hard in its opening in late April, CoinDesk reported. While that improved in its second week, the decision to open it in beta to a small portion of the waiting list makes it hard to read much into it.

Read more: Coinbase Sees Slow Uptake for NFT Marketplace Test

Then there’s Square Enix, the game studio behind hits like Final Fantasy and Tomb Raider, which sold off several of its biggest titles this week to raise $300 million to invest in the future of NFT gaming, Decrypt reported.

There are other signs that interest in selling NFT collectables, at any rate, hasn’t abated. Golf magazine this week reported that the PGA Tour is preparing to launch NFTs on two platforms, including Tom Brady’s Autograph. The NFTs will directly benefit top players who opt in. That comes of the heels of recent moves by Major League Baseball to move into NFT playing cards, and by the NBA — whose Top Shots collection helped introduce NFTs to the public — to create a Playoffs-themed line.

See more: Topps Releases New NFT Collection for MLB

Read also: NBA’s Latest NFT Trading Cards Evolve With Players’ Playoff Stats

Then there was the metaverse-fueled train wreck on Ethereum, which saw the minting of 55,000 metaverse-related NFTs slow the top NFT (and everything else) blockchain to a crawl and caused fees to go far beyond spiking, rising to as much as $4,000 to $10,000 per transaction, so the $317 million sales cost $200 million in fees.

Read more: Bored Apes NFT Rampage Spikes Transaction Fees to $200M for 55,000 Sales

Also this weekend, the Solana blockchain, and Ethereum competitor, actually collapsed, shutting down for seven hours as bot trying to win a slot in another NFT launch saw it flooded with as much as 6 million transactions per second — far more than the highly scalable blockchain could absorb.

See more: Another Blockchain Overwhelmed by NFT Transactions as Solana Crashes Outright

Moving On

Despite those NFT feeding frenzies, there are signs that the use of NFTs is spreading out from the lowest-hanging fruit of overpriced collectable images. While NFTs useable in the metaverse are part of that — despite the fact that most metaverses are still under development — companies are starting to use NFTs more creatively.

Goldman Sachs announced Thursday (April 28) that is was interested in tokenizing real-world assets, with Mathew McDermott, global head of digital assets for the banking and investment giant, saying, “We are actually exploring NFTs in the context of financial instruments, and actually there the power is quite powerful.”

Read more: Goldman’s Interest in NFTs Could Speed the Tokenization of Real Assets

The Vatican has given NFTs its (unofficial) blessing, announcing Monday (May 2) that it partnered with several companies to create an immersive, 3D gallery of its artwork.

See more: Vatican’s Art, Content to be Housed in VR and NFT Gallery

Then there’s China, which has not quite banned NFTs but is cracking down hard enough to make large companies rename them with non-crypto wording. In the first ruling on NFTs, a Chinese court found a marketplace liable for allowing a seller to list artwork without the author’s permission, the South China Morning Post reported. The $611 fine is nothing compared to the burden of authenticating the ownership rights of every NFT seller and will likely stifle the market even further.