With this in mind, the burgeoning world of non-fungible tokens (NFTs) can be seen as a bubble almost ready to burst. Other blockchains offering cheaper and faster transactions are also providing more diverse options in the NFT space. A report by cryptocurrency news site Protos gained a lot of traction last week after claiming that the NFT market "imploded in May". Even meme creators have jumped on the idea, offering NFTs from their most viral offerings and making big bucks in the process.
But the bubble is bound to burst, according to cryptocurrency pioneer Fred Ehrsam, and the Coinbase co-founder gives NFTs three to five years before losing most, if not all, of their value. As can be seen in the chart above, active wallets in the NFT markets peaked at the end of March and have since fallen by more than 40 percent, as declining values combined with high transaction fees on the Ethereum (ETH) network have kept traders out of the market. The cumulative number of active NFT wallets has also fallen from more than 12,000 at the daily peak for each NFT category to just 3,900 yesterday (down almost 70 per cent). NFTs linked to the so-called "metaverse", such as digital real estate and other virtual artefacts, are outselling tokens linked to cryptocurrency.
The NFT frenzy has been one of the major cultural events of this year, however, after a short and very lucrative run, it looks like the market is ready to crash. Binance's smart blockchain hosts the Battle Pets (gaming NFTs), PancakeSwap (financial NFTs) and BakerySwap (collectible NFTs) projects, and Binance has recently launched a decentralised, non-custodial NFT platform in addition to its NFT marketplace. Pokemon-inspired blockchain NFT game Axie Infinity, which moved to the Ethereum Ronin sidechain earlier this year, has seen phenomenal growth, especially in the Philippines. All in all, the data suggests that the NFT bubble has lasted only four months and burst around May.
While the current statistics may look bad when compared to recent all-time highs, looking at a longer time frame shows that the average number of CLS sales increased by almost 300 between January and the end of May. NFTs have shaken up the digital trading space this year, yet one cryptocurrency expert warns that 90 per cent of their value will plummet "to little or no value in the next three to five years". Sales of NFTs and active wallets fell by more than 40n last month, but the new Layer 2 infrastructure is preparing the sector for the next wave. Prices for NFTs, the digital certificates that have taken the art and collecting world by storm this year, have plummeted around 70 per cent from their peak in February.
That activity has shifted to OpenSea, where buyers are looking to trade in their NFTs for a higher price, according to Ian Kane, spokesman for DappRadar, which tracks the market.