NFT Market Collapses as 96% of NFTs Become Inactive

According to NFT Evening’s 2024 report, the NFT market is experiencing a severe crisis, with an astonishing 96% of NFTs now deemed “dead.”. This classification includes NFTs that have not been traded at all, have low trading volume in the past week, and have low engagement scores on social media. Based on the report, more than 5,000 NFT collections and about 5 million transactions were reviewed to reveal the disappointing decline of the market.

NFT Holders Face 45% Average Loss as Project Lifespans Fall Short

The economic impact for those who own an NFT is just as concerning. About 43% of owners are in the red with an average decline of about 45% on their investment. This can be attributed to the depreciation in optimism that was present in the previous years. Data reveals that, the average lifespan of an NFT project is merely 1.14 years, which was considerably shorter than the 2.5-year average lifespan of traditional cryptocurrency projects. This short life span makes it hard for NFTs to sustain value especially if faced with challenges in the market.

The Lifespan of NFTs: A Swift Decline

It was particularly concerning in the year 2023 as approximately one-third of all the NFTs in existence were classified as inactive within that timeframe. This decline has raised many questions and doubts about the sustainability of these digital assets among investors. Some of the famous collections, such as Pudgy Penguins, have seen their values completely wipe out, with some investors recording up to 97% losses. Not even legacy projects such as the CryptoPunks are immune to this trend since sales have hit record lows.

However, some projects have retained some level of engagement and value, for example, Azuki, which has managed to succeed due to its community support and proper marketing. Nonetheless, such cases are rare and the overall picture appearing for any organisation seems rather bleak.

Market fluctuations and assets devaluation have triggered a rise in doubts concerning NFT’s reliability as an investment. Although there could be some projects which may turn around, the majority seems to be on a decline model.  

The NFT market declined to a new low in August 2024 as monthly sales dropped down to $374M. This is the first time this year that cumulative sales have dipped beneath $400 million. The decline underlines the variability and challenges that the digital collectibles market faces and particularly in contrast to the peak values observed in early 2021.

Highs and Lows in Comparison

According to the market analysis, monthly NFT sales were at their highest by March 2024, surpassing $1.6 billion. However, the following months have been indicating a decreasing trend and reaching the lowest point in August. This shows a 76% decrease from the yearly peak. 

There are various factors that have contributed to the significant decline of NFT sales. There is a shift in speculative capital from NFTs to other areas such as memecoins, as several investigators observed. Moreover, there is also a broader set of regulatory issues and economic fluctuations within the crypto space that have impacted the investor sentiment.

Transaction Volume and Value Trends

However, there are interesting tendencies in the dynamics of transaction values despite the general trend that does not indicate the growth of sales. For instance, in August, the average value of NFT transactions increased by 27%, rising from $39.93 to $50.74. This means that while the total number of transactions may have gone down, the value of each transaction is much larger. Also in August the total number was 7.3 million NFT transactions, down by 31% from  July’s 10.7 million.

Looking Ahead

As for now, the future of the NFT market is unpredictable. A similar situation has occurred in previous years, and several analysts expect the market to stabilise through the development of new applications and innovations. For the time being, the collapse of the NFT market in August shows that the market of digital collections is full of challenges and fluctuations. For the latest updates on this story and other cryptocurrency market news, keep following DeyThere.