NFTs have grown at an alarmingly fast rate over the past few years. As a person interested in NFTs, you know how Non-Fungible Tokens are revolutionizing the way we perceive our world by bridging our tangible and virtual realities. At some point, this bubble will burst.
Though NFTs will eventually crash, it is not known precisely when it will happen. The best estimate is soon.
Through NFTs and cryptocurrencies, we have found a way to add value to the intangible, allowing us financial gain both physically and in cryptocurrency. But, when will NFTs crash? We will discuss some possible scenarios.
When Will NFTs Crash?
Disclosure: the following is not financial advice and should not be construed as such. Like anything in the world, use caution when making monetary decisions. This article is merely informational, and opinions are solely of the author.
By watching places like Non-Fungible or NFT Bank, you will be able to see what various NFTs are doing and more daily. Also, pay attention to Live Coin Watch, so you can see where cryptocurrencies are at.
There are many different non-fungible tokens and token types. Depending on what NFTs you have invested in will determine what you watch. NFT categories include:
Matty DCL Blogger explains that for traditional investors, it is difficult to comprehend how “‘tokens'” have value because they are used to buying equity shares in companies. Within the NFT communities, a token provides a way to “transact and distribute value.”
NFTs are here to stay. Those watching NFTs on the market have already witnessed crashes, such as the June 2021 crash. Like most stock investments, the inflated buying and selling can only be supported for so long before interest wanes and prices plummet.
This does not mean that these “stocks” are dead, just that the bubble created in the buying frenzy became too large and burst. With NFTs, especially collectibles and art, it is a lot like watching the value of physically tangible collection pieces such as:
- Trading cards
- Fine Art
- Classic cars
During certain time frames, the estimated value will rise or fall according to what people are interested in and the state of the economy. As collectors and knowledgeable investors, people won’t often panic if the value of what they have suddenly dropped. They will sit on it, knowing the market will pick back up eventually.
So, during these crashes, if you didn’t sell your affected NFTs when their value was high, you will see your investment plummet. Depending on what NFTs you invested in, these seemingly worthless tokens may shoot up with another influx of interest and a buying frenzy.
So, let’s look at why NFTs crashed in June 2021 and what could influence future crashes.
What Scenarios Could Cause an NFT Crash?
There are a few scenarios that could cause the NFT market to crash. Some of these include:
- Copyright Infringements and scams
- Bitcoin and other cryptocurrency crashes
- Silent crashes
Because non-fungible tokens are relatively new, there will be issues that need to be addressed, like copyright infringement to protect investors as well as creators. Many NFT experts, including NFT Verse, remind us that NFTs are highly volatile right now.
How Will Copyright Infringements Cause An NFT Crash?
Copyright infringements of NFTs need to be considered when investing because we have strict copyright laws in place. As an investor or consumer, you need to research the IP (intellectual property ownership) before making your investment.
If someone has incorporated someone else’s work into their work without having rights to that work, they can be fined, as can any buyers that did not do their due diligence. Copyright infringement can cause an NFT to crash because high prices and extreme interest are suddenly soured.
To get a better understanding of copyright and how it can apply to NFTs, check out:
How Do NFT Scams Cause a Market Crash?
NFT scams fall into the copyright infringement area. However, a person can unknowingly have a copyright infringement, where scammers are outright stealing the non-fungible tokens and selling them as their own for a minute fraction of the original.
As these scams take hold, investors need to do their research and ensure they are buying from a verified seller with a blue ticket next to their name. Research the NFT you are interested in.
DCL Blogger uncovered a very elaborate scam called “Metabulls,” where the creator claimed they had created a game solely in the “Metaverse,” and by buying NFTs, you could:
- Play using your Metabull avatar
- Gain sweepstakes access
- Earn other opportunities
This site claimed that the more NFTs you bought of the Metabulls, the further you would advance in the game. But none of it was real. They did not exist and were just there attempting to take your money.
Pump and Dump scams have been around for a very long time. These directly affect the market because someone will buy large amounts of certain NFTs, driving the demand for that asset. Once they have driven the price up, they “dump” or sell it off quickly, causing the market value of that non-fungible token to plummet.
When investors and collectors begin noticing an influx of scams, they may shy away from certain NFTs that are going strong. This, too, can cause a valley in the NFT market.
How Do Cryptocurrencies Affect NFTs?
NFTs are a type of cryptocurrency, according to Crypto News. Therefore, when something affects cryptocurrencies, such as China banning the use of cryptocurrency or Elon Musk refusing cryptocurrency as payment, it affects what happens with NFTs.
So the value of the NFTs rises and falls accordingly. Those investing in NFTs may see their stock fall rapidly and panic sell for fear of losing all of their investment.
NFT enthusiasts do not view crypto in equal terms as NFTs because they “hold value distinct from the cryptocurrency that bought them.”
The NFT Silent Crash
In April 2021, people began noticing the floor value of NFTs dropping out seemingly overnight, although prices had been dropping since February 2021. As buyers vanished and sellers dropped their prices because nothing was moving, the NFT market took a huge hit.
For many, the bottom dropping out was surprising; they just didn’t see it coming. When it was noticed, many sold NFTs for a fraction of what they bought them for out of fear or not being able to watch the investment plummet so rapidly. The market had gone bearish.
By June 2021, news began circulating that the NFT market had officially crashed, falling nearly 90% from its May peak and NFTwallets dropping from 12,000 to 3,900 as of June 2. Headlines circulated the internet. Some of these headlines wondered if NFTs were dead.
The bullish push of frenzied buyers had reached a breaking point. To those without much knowledge, it looked like NFTs were a quick-dying fad. But, that was not the case. This lul provided an opportunity to those still in the game.
Though everything had slowed to a crawl, the NFT market continued to survive, making this more of a valley than a genuine crash.
By September 2021, the NFT market had shown recovery and was in a bullish phase, rising rapidly as athletes and celebrities began buying and showing off their NFT collectibles. Businesses and auction houses also started jumping into the NFT world, further adding to the NFT market.
Since the September peak, NFTs have seen a downward trend, with NFT buyers showing an upward trend. It is thought this is “due to the cooling-off period of secondary markets, and could also be due to lower ticket prices as new crypto buyers enter the market.” This steady slowing shows a more cautious NFT community.
Are You Ready for the Next Crash in the NFT Market?
According to Gary Vee, “an NFT winter is coming.” The media picked up on his predictions at the beginning of November. Gary says this NFT winter will be harder than what was seen in April and May of 2021.
This “winter” is necessary for the NFT market to weed out the greed and gain control of the supply and demand problems. During this time, investors who have researched the NFTs well will be able to invest in more stable projects that will last.
According to Doug Clinton, the NFT winter might be spurred by Coinbase entering the crypto market. We will most likely see a surge and then another bottom drop.
However, this NFT Winter is all speculation. NFTs are new and, like anything new and popular, no one knows what will happen next. It could just as easily keep it on an upward and forward trajectory.
It is best to be prepared for the worst while hoping for the best. It is safe to say that NFTs are here to stay. Don’t believe me just yet, then read this eye-opener 10 Reasons Why NFTs Will Change the World.
Most NFT investors and holders say, “don’t get too caught up in getting to the peaks and be mentally prepared for the valleys to come.”
NFTs Are Here to Stay
According to Business Insider, the government will eventually be using NFTs, cementing them into our economy. The government is already watching and placing sanctions on cryptocurrency addresses for money laundering and ransomware linked to NFTs. This is an acknowledgment of the validity of NFTs and Cryptocurrencies.
Non-fungible tokens have become a way in which creators and investors are able to:
Like many new ideas and inventions accepted by a majority, everyone is excitedly jumping in, causing rapid growth in net worth. Through experience in the stock market, we can also expect NFTs to reach their peak and drop rapidly.
This rise and crash can be seen with just about anything of value. We see it in:
- The housing market
- Trading cards
- Energy in the forms of fossil fuels and renewables
There is an ebb and flow to the entire system. Whatever is deemed popular at a given moment will gain momentum quickly as people invest money into it. Understanding this as an investor or a creator is crucial to make sure you are making the right choices in this field.
If you want to become a creator of NFT, these articles will help you get started and perhaps drive you into a lucrative position:
- How To Get Your NFT Art Noticed: Complete Guide
- How Much Does It Cost to Mint an NFT?
- 11 Things That Make a Successful NFT (4 Is An Eye-opener)
Or, if you are new to collecting or buying NFTs, these short articles will definitely help out.
- NFT Crypto Art Collector Starter Guide | Why It’s So Easy
- Top 9 Crypto Wallets to Buy and Collect NFT Art
- Can You Buy NFTs With a Credit Card? Simple Ways to Purchase NFTs
With non-fungible tokens of any sort, it is possible and plausible that if it has become popular, it will see a massive spike in growth and interest. At some point, the interest will drop off. This could be because the prices of the stocks are just too high for anyone to risk investment.
Sometimes this will create a plateau where people are buying and selling at an inflated rate, and other times all activity appears to drop suddenly and steeply. Either way, the inflated stock will eventually reach its peak and drop. This is true of NFTs as well.
NFTs Will “Crash” and Rise
There will inevitably be steep peaks and deep crashes in the ever-evolving and fast-paced world of non-fungible tokens. These valleys or crashes are bound to make most people nervous, but they are just parts of the growth process. The crashes will help weed out the greedy investors, scams, and NFTs with little to no long-term value.
The market will become less of a rollercoaster and more stable as NFTs gain more recognition and new businesses become involved in the scene. As NFTs and other cryptocurrencies are recognized as real currencies with tangible values, even people that were skeptical will seek areas to invest.
Remember to pay attention to what is going on with all cryptocurrencies. The general rule of thumb with investments is essentially do not invest more than you are willing or able to lose, and be prepared to wait out what could be a long and dry period if you are serious about your investment. Oh, and of course, do your due diligence and try not to be a victim of the latest scam.