The untold reason why many NFTs lost value (2024)

FAQs

The untold reason why many NFTs lost value? ›

Many investors purchased NFTs intending to sell them at a better price later, rather than appreciate them for their artistic or cultural value. As a result, when the market fluctuates or interest fades, the value of these NFTs might fall sharply.

Has the value of NFTs dropped? Yes, the value of many NFTs has significantly declined following their initial surge. This drop is attributed to various factors, including market saturation, decreased speculative trading, and shifts in the broader economic environment.

After several high-profile bankruptcies, the collapse of crypto exchange FTX, multiple scandals and the trial of Sam Bankman-Fried, cryptocurrency values tanked almost across the board. The NFT market, an offshoot of crypto, took an even bigger fall.

Many NFTs purchased for high prices in 2021 are now worth a fraction of what they were originally sold for, with reports suggest that a large percentage of NFTs have become virtually worthless.

“NFTs have seen incredible returns on investment, with rare and sought-after pieces being sold for big profits, and some NFTs can still offer a unique way to diversify your investment portfolio if you have already invested in other digital assets. The reality, however, is many NFTs stay unprofitable.”

At the same time, NFTs were constantly plagued with worries that the majority of interest was confected through so-called “wash trading”, where people buy from themselves to bump up prices. And increased regulatory interest – including from tax authorities – made investing in NFTs less attractive for lay traders.

A 2023 report from crypto analysis firm dappGambl found that 95% of NFTs are worth practically nothing. The report found that, following the immense hype over NFTs between 2021 and 2022, around 79% of all NFT collections have remained unsold.

The concept of non-fungible-tokens (NFTs) and their potential value was difficult for many people to get their heads around. It turns out the global scepticism was warranted. A new study has found 95% of NFT collections are worthless.

Currently, the NFT segment has still not recovered from the downturn, as indicated by the Nansen NFT 500 Index, which was above the 1,800 value at its peak in 2022 and is now at around 250.

“The flood of images with questionable value is not happening again,” said Ilya Stadnik, CEO at Zent. According to him, NFTs could, in some cases, be a good investment — provided careful selection is applied. “I could say 99.9% of those are not worth considering.

Why are NFT sales declining? ›

The decline in sales doesn't necessarily mean NFTs are going bye-bye. Instead, it points to the growing prevalence of low-barrier NFT sales and the space becoming more accessible to general audiences, who may not want to spend a lot on NFTs right away.

There are many reasons why NFTs failed, but here are some of the main ones: NFTs were overhyped and overvalued. Many people bought NFTs not because they appreciated or enjoyed the content, but because they hoped to flip them for a quick profit. This created a speculative bubble that was bound to burst sooner or later.

Still, they became almost worthless until 2024, and NFTs began to be accepted by the general public in the 2000s because it became possible for artists, creators, and collectors to give their digital stuff a physical representation on the blockchain with NFTs and trade those tokens.

With a more mature and diverse market, increased utility across various sectors, and positive market sentiment, NFTs are poised for a potential recovery in 2024. Challenges like scams and regulatory issues remain, but the outlook is optimistic for NFTs to find broader adoption and utility beyond just collectibles.