The latest market data analysis confirmed that the non-fungible tokens (NFT) markets have experienced a sharp increase in the last seven days, despite the current crypto market downtrend. This sharp correction shows that notable investors see the recent downturn as a buying opportunity.
Since the start of May, the total market capitalization for non-fungible tokens (NFTs) increased to more than $19.4 billion, with the total market volume exceeding $1.2 billion in the last seven days.
Despite this sharp increase, trading volumes are still lower than usual, making spectators wonder whether new projects are delivering workable results from the amount of liquidity pumped into those projects.
Many traders recently flooding the NFT space are basing their trade assessments on roadmaps, announcements, and projections shared by teams launching new projects. Nonetheless, based on the speed at which the NFT sector is evolving, there are factors limiting NFT investments.
Notable projects and blue-chip tier NFTs, including Cool Cats, Axie Infinity, and Bored Ape Yacht Club, have slightly diverted from their roadmaps to curb their users’ enthusiasm. Thus, investors must understand that investing in a project based on a roadmap, could be ultimately disappointing.
Factors Affecting NFT Projects
Every investor desires to seed a project that seems to be of blue-chip caliber. However, a project might qualify in all aspects, including a good track record from previously developed working projects, but resonates due to a diverse group of people.
The project might also have a strong community and a desirable roadmap, making investors think they have stumbled on a win. However, all these features do not guarantee success.
Cool Pets, a renowned blue-chip tier NFT, is a perfect example. The NFT project launched on January 31 and intended to unleash its play-to-earn (P2E) game, Cooltopia, in the next few days. Unfortunately, the project experienced a few technical setbacks that delayed the rollout, a move that has resulted in many NFTs traders losing faith in the project.
In addition to these woes, on April 29, Chris Hassett, the former CEO of Cool Cats NFT, resigned, and the company is now searching for his replacement.
In most cases, unforeseeable events may create logistical problems and are the major limitation of the success of a project. The acceleration of growth may also create stress in a project, affecting its ability to safety scale and often making it vulnerable to external threats.
After blooming remarkably, Axie Infinity was not immune to a socially engineered hack that left more than $625 million lost. This hack represents one of the largest exploits in the history of crypto. For now, the Ronin Bridge that transmits funds from Axie Infinity to the Ethereum mainnet remains closed to allow a comprehensive audit.
This unforeseeable historical event has left its investors with their capital locked and their in-game tokens on a steep downtrend. In that context, the community’s morale continues to reduce, with investors wondering what to do next.
Impacts Of Market Cycles On NFT Projects
Apart from making a project vulnerable to threats, growth acceleration may also attract other challenges. In most cases, as the community of a project grows, the number of opinions regarding the future and sustainability increases, marking the beginning of speculations.
Two weeks ago, Yuga Labs, the creator of the Bored Ape Yacht Club, launched minting of its real estate venture, “Otherside,” in Metaverse. The digital-land NFTs “Otherdeed” went down as the most anticipated mint for 2022, with speculated value propositions at $110,880.
Yuga Labs priced Otherdeed NFTs in ApeCoin (APE) on the secondary marketplace, OpenSea, as a payment for future listings. The Otherside digital-land NFTs sold for an average price of $25,629 pre-reveal but plummeted to $15,510 post-reveal, alongside the decline in the price of APE.
Since many, Web3 investors expected a mega splash mint, they did not expect the overall crypto and NFT market could head into a downward spiral. Unfortunately, Ethereum-based NFTs have dropped by 15%, with their prices also taking a whip in the last seven days. Solana (SOL)-based NFTs have also experienced an impact, with SOL trending nearly 40% downward over the same period.
At the time, many NFT traders anticipated that the mint would boost the NFT market with liquidity. Although the liquidity injected went into some collections, the overall total sell volume for NFTs has dropped by 40% in the last seven days. These figures suggest that the NFT market could be entering a consolidation phase.
While many crypto markets display red candles, NFTs investors are finding themselves in tough times to make their anticipations. Some investors have decided to sell their assets at cheap prices to cover margin calls and liquidations. Others are rationalizing the negative slope to retail investors panicking about interest rate hikes in the United States.
The WAGMI “we’re all gonna make it,” which is the mantra that grew popular in the NFT industry, is now under trial. Traders struggling with market cycles decorated in all-time high and monumental volume must now showcase their resilience.
Nonetheless, the recent lulls will make strong investors and traders. Many investors will use these market dips as the time to “stack and survive” by adding their portfolios. This move might ride the current lows back to new all-time highs.