TL;DR Breakdown
- The NFT price is governed by Ether.
- The low crypto price brings losses for non-fungible tokens.
The crash of the most popular cryptocurrencies this week weakened the dollar value of non-fungible tokens. NFTs are a way to trade cryptocurrencies by registering their ownership status in Blockchain technology. These tokens became famous in February and March of this year, generating millions of dollars in sales. This sudden increase is due to the rise in cryptocurrency prices in 2020.
Non-fungible tokens are generally obtained with the purchase of Ethereum or dollars in a wallet. The digital market had a depressing crypto price in recent weeks; by Wednesday, $1 trillion had been lost. The price of Bitcoin plunged 40%, while Ether fell 30%.
NFTs have a drastic drop in value
NFT‘s crypto price is traded on the Ethereum market, so investors can adjust high values to keep them constant to the dollar. But with the Ether trading well below its all-time high, NFT’s dollar price has fallen dramatically.
Pranksy, an NFT collector, noted that the value of his portfolio dropped by more than $10 million in one day. However, he clarified that he doesn’t see his collection of 100,000 as less valuable.
Investors say that art, game items, virtual land, or other assets that NFT represents have a unique value. Trader Andrew Steinwold thinks that because everything is valued on Ethereum, the value of NFTs are expected to be less. However, the crypto price is anchored to a bottom of five years and not weeks, as with cryptocurrencies.
But the NFT popularity has cooled in recent weeks. According to figures from OpenSea, NFT sales in April were 93.6 million compared to almost 150 million in March.
The crypto price drop affects non-fungible tokens
As the crypto price took a nosedive, the NFT market was also affected by gas rates. These commissions are part of the payments that cryptocurrency miners receive for each downgrade.
On Wednesday, the value of gasoline soared as the demand for buying/selling Ethereum increased. That caused NFT’s liquidity to run out as merchants may have slowed down transactions to save on gas fees.
The most famous trading market for NFT, OpenSea, had a drop in its daily volumes exceeding $1.1 million. This loss occurred on Wednesday, and by last Tuesday, it plummeted to $2 million. Hamish Barnes, Growth Leader at OpenSea, clarifies that gas prices made lower-value items more challenging to obtain.
