Once a booming crypto sector, non-fungible tokens have been the hardest hit in the industry’s ongoing bear market. Bitget boss Gracy Chen tells us what went wrong for so many NFT collections, but why she’s still a believer in the asset class. 

NFTs, non-fungible tokens – it was the frothiest sector of the legendary crypto bull run of 2021/22, with sky-high valuations on numerous “blue-chip” projects including Bored Apes, Crypto Punks, Doodles, Moonbirds, Azukis and many more. 

At its peak, the NFT sector saw almost US$2.8 billion in monthly trading volume recorded in August of 2021 back when Bitcoin was trading near US$50k. We also saw celebs including Paris Hilton, Jimmy Fallon, Justin Bieber and loads more ape in. 

With the benefit of hindsight, Bieber forking out US$1.3m for a Bored Ape (floor price now about US$40k) was a massive top signal if ever there was one. 

So what happened? For one (big) thing, the longest bear market in crypto’s short-ish history to date. A bear market that still has crypto investors trying to navigate the woods. 

It’s engendered something of a death spiral of sentiment across the crypto space and the realisation that many NFT assets were indeed incredibly overvalued.

Many, or most, outside the crypto bubble already long held that opinion. Were they wrong? For the vast majority of NFT assets in existence… probably not, no. 

But is the NFT asset class “dead” like so many also seem to be extrapolating? Also likely not. 

Gracy Chen, Managing Director of the widely used global crypto exchange Bitget, has some research-backed thoughts on it all and helps us to delve a little deeper.


The NFT asset price bubble

“Since the NFT market reached its peak in 2022, the weekly trading volume in the NFT market has decreased by 97%, and many top-tier blue-chip NFTs have seen their prices plummet from their all-time highs,” wrote Bitget’s Chen in info shared with Stockhead

Source: https://dune.com/hildobby/NFTs


The Bitget MD believes there are several reasons for the state we currently find NFTs in. 


“There was a significant NFT asset price bubble. Since 2020, with the continuous easy market environment, incremental funds have been flowing into the cryptocurrency market, including not only traditional cryptocurrency assets and DeFi assets but also new assets like NFTs. 

“Due to the unique properties of NFT assets, such as limited supply and the ability to artificially create rarity, it was easy for funds to speculate, creating FOMO sentiment in the market and leading to a significant bubble. 

“However, as global markets have tightened and funds have flowed out of the cryptocurrency market, NFTs have been sold off by market participants.”


The mystique has gone

Chen also notes that as the NFT market has matured, projects have gradually become more transparent, with the “early mystique and scarcity associated with NFTs” decreasing as a value narrative and gradually fading. 

“Intense competition between project teams and trading platforms has also eroded the first-mover advantage of early projects, leading to a gradual return to rationality in asset prices,” added the Bitget boss. 

“NFT project teams have struggled to continuously deliver products as per their roadmap. Many top-tier blue-chip projects have failed to deliver products that satisfy the market, while excessive spending on marketing has left them lacking the funds needed for ongoing operations. 

“This lack of sustained attention and market consumption has inevitably led to declining prices and trading volumes for these projects.”


But here’s why NFTs still have a future

What is it about NFTs, then, that still keeps true believers engaged? 

Proof of provenance via immutability on the blockchain is at the core of the technology’s appeal.

While so much of the hype around NFT collections that rode the last wave was based on not much more than the thin PFP (profile pic) narrative, NFTs do lend themselves to various utilities when they’re given the power to do so. 

As Chen notes: 

“NFTs still offer several advantages as an asset class, such as providing a means of establishing ownership of digital art through non-fungible tokens, returning royalties to creators in NFT transactions, thereby providing ongoing income to artists, and the emergence of collateralised lending projects based on NFT assets, among others.”

Other NFT advantages and utilities we can think of include: fractionalised ownership – where singular assets can be split via an NFT stake; in-game asset ownership across the gaming landscape; and token-gated access, whereby NFTs can be used to give holders exclusive access to events, content and/or services. 

“These advantages represent different experiences facilitated by NFTs as a new type of asset,” noted Chen.

“While the short-term valuation of the NFT market requires time to adjust, I believe that due to these asset characteristics, the NFT market will continue to develop significantly in the long term.” 



This article was developed in collaboration with Bitget, a Stockhead advertiser at the time of publishing. 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.