After the initial euphoria that preceded their surge in popularity, the market for non-fungible tokens (NFTs) has collapsed. Many NFTs saw a dramatic decline in value, which led some people to wonder about their long-term viability. There were several contributing variables, but the sell-off in digital assets over the previous three months was the main one.

To put things in perspective, NFT is a brand-new class of immutable, blockchain-based assets. Consider it unique rather than something you could mass-produce, like a signed jersey or a baseball card. As a result, NFTs are digital assets that can be utilized as tokens or collateral. Despite this, some serious doubts have been raised about whether this technology is ready for widespread use. According to the DappRadar analytics platform, trade volume on OpenSea, the largest NFT marketplace in the world, decreased to 99 percent in the four months between May and August 2022. There are many reasons to wonder how widely accepted NFTs will be and whether this trend is just getting started or if it will soon lose steam. Today, we’ll discuss the top five causes of the severe decline of the NFT market.

The tepid response to unethical behavior

One of the leading causes of the price decline’s sharp decline was the lackluster response to dubious NFT market operations. There are many questionable blockchain ventures, but the NFT sector is full of fraud. Shady developers selling essential assets on marketplaces make up a sizable chunk of the NFT economy. Given the relative ease of putting up a website and selling false works of art or sports memorabilia, this presented a golden opportunity for con artists. Additionally, the market is reacting appropriately. People are simply not using these fundamental marketplaces, and the market is not growing.

Cryptocurrency sell-off in full

Recently, all major cryptocurrencies have been trading in the red, putting even long-term investors to the test. According to CoinMarketCap, the worldwide cryptocurrency market has decreased from $1.02 trillion to $970.03 billion, a 15% decline since January 2022. The floor price of NFTs was directly impacted when the cost of Ethereum fell by more than 50%.

FOMO and uncertain investor sentiment

Fear of missing out (FOMO) was a significant factor in the NFT market’s fast rise, but now that prices have sharply fallen, investors are concerned about making a risky investment. Investors are no longer interested in the NFT market as businesses only offer essential digital assets for sale. This is made worse because many low-value goods are available in controlled markets, making investing more uncertain.

Also Read: The NFT Market Records A Declining Number Of Buyers

NFTs’ lack of distinct usage cases

NFTs’ key selling point is their practical utility. Everything that is sold on a marketplace can later be sold again. Even though it works especially for digital art, it is not very helpful for digital goods like clothing or footwear. Sure, you can sell a pair of shoes to someone, but what will you do with that pair? They cannot be worn, and it is unlikely that they can be sold again in the future. It is difficult to imagine how NFTs can be valuable because there are no obvious use cases for them in the real world. Because of this, almost all widely used NFTs are works of digital art. In the real world, it is the only thing that makes sense. Furthermore, while controlled markets may contribute to the rise in the value of NFTs, they won’t be worth anything if the blockchain project at its core fails.

The same issues that plague ICOs also affect NFTs.

The blockchain industry is tremendously hyped up, and it appears like every new initiative will revolutionize society. However, the reality is that only a tiny percentage of blockchain ventures succeed, while the majority fail. Centralized markets contribute to the rise in the value of digital assets, but they can also be detrimental to investors. The intermediaries in centralized markets take a portion of each sale of a digital asset. Additionally, they have high listing costs and offer no assurance that the thing you purchase won’t be fake. Therefore, despite the success of centralized marketplaces, Initial Coin Offerings (ICOs) and NFTs have issues. The main distinction is that centralized marketplaces are nothing more than intermediaries getting a share of every sale, whereas ICOs offer to build blockchain enterprises.

The NFT market is in a downward spiral and will probably remain so for some time. The cryptocurrency markets are highly unpredictable for investors, and it’s impossible to predict when the next bull run will occur. The NFT market may become the newest trendy investment once prices rise again.