The market shone gloriously last year as crypto-rich speculators spent billions of dollars on the risky assets, pumping up prices and profits. Now, six months into 2022, it's looking ugly, reported Reuters.
Monthly sales volume on the largest NFT marketplace, OpenSea, plunged to $700 million in June, down from $2.6 billion in May and a far cry from January's peak of nearly $5 billion.
By late June the average NFT sale sunk to $412, from $1,754 at the end of April, according to NonFungible.com, which tracks sales on the Ethereum and Ronin blockchains.
"The crypto bear market has definitely had an impact on the NFT space," said Gauthier Zuppinger, co-founder of NonFungible.com.
"We have seen so much speculation, so much hype around this kind of asset," he added. "Now we see some sort of decrease just because people realise they will not become a millionaire in two days."
The NFT market has collapsed along with cryptocurrencies, which are typically used to pay for the assets, at a time when central banks have jacked up rates to combat inflation, and risk appetite has withered.
Bitcoin lost around 57% in the six months of the year, while ether has dropped 71 percent.
Is this temporary?
For critics, the crash confirms the folly of buying such assets, tradable blockchain-based records linked to digital files such as images or videos, often artwork.
The Malaysian businessman who bought an NFT of Jack Dorsey's first tweet for $2.5 million last year struggled to get bids of more than a few thousand dollars when he tried to re-sell it in April.
But Benoit Bosc, global head of product at crypto trading firm GSR, sees the downturn as the perfect time to build a corporate NFT collection - the crypto equivalent of the fine art traditional banks display to impress clients.
Last month, GSR spent $500,000 on NFTs from what Bosc calls "blue-chip" collections - those with large online fan bases.
His purchases include an NFT from the Bored Ape Yacht Club, a set of 10,000 cartoon monkeys made by U.S.-based company Yuga Labs and promoted by the likes of Paris Hilton and Jimmy Fallon.
Nonetheless, the future of NFTs is distinctly uncertain, as the era of low interest rates which encouraged investors to take risky bets comes to an end.
Some market watchers say the influence of NFTs on the art market will shrink. Meanwhile, even though the much-hyped vision for a blockchain-based metaverse hasn't materialised yet, enthusiasts expect NFTs to shake up the gaming industry, for example by allowing players to own in-game assets such as avatar skins.