Data from DappRadar reveals that the NFT market has seen a significant contraction over the last several months. Monthly trading volumes have dropped by a staggering 81% from January 2022 to July 2023. Concurrently, monthly sales figures have fallen by 61%. Notably, renowned NFTs like Bored Ape Yacht Club and CryptoPunks have seen their floor prices reach lows not seen in over two years.

Market Sentiment: Investors and Sellers Search for Value

Lorenzo Melendez, president of the NFT project Pudgy Penguins, points to negative trends across market charts. Both buyers and sellers are encountering challenges in identifying long-term value in these digital assets. Despite signs of stabilization in the broader cryptocurrency market, the NFT sector remains volatile and uncertain.

Shuttering Marketplaces: Recur and Nifty’s Close Shop

As the downturn persists, repercussions are becoming more evident across different stakeholders. NFT marketplaces like Recur and Nifty’s are shutting down due to unforeseen challenges. Another leading platform, Blur, has seen its Ether-measured sales volume decline by a remarkable 96% between late June and early August.

Artists and Regulatory Concerns

Digital artists, who had found new avenues for revenue through NFTs, are also facing hurdles. OpenSea, one of the significant NFT marketplaces, has recently made royalties on secondary sales optional, causing worry among creators. Moreover, regulatory concerns are on the rise. The U.S. Securities and Exchange Commission has initiated its first enforcement action against an NFT-related entity.

Silver Linings: Some Segments Show Resilience

Despite the downturn, certain segments within the NFT market continue to hold value. High-end artwork from renowned creators and low-value NFTs used in gaming are still in demand. Lorenzo Melendez suggests that the market may have “one very tough bottoming out left to go,” but it’s not all doom and gloom.

Factors Contributing to the Downturn

Various reasons have been cited for the decline in the NFT market, from a shift from a collector-driven to a trader-driven market to a 32% drop in the price of Blur’s native token in the last 30 days. Even the term “NFT” appears to be falling out of favor, with auction houses and projects increasingly referring to them as “digital art” or “digital collectibles.”