The NFT market in search of normalization

After the shock in the cryptocurrency and stablecoin market, the NFT market saw a sharp decline in volumes between February and April.

Temporary depression or bursting of a bubble? The market for certified digital items (“NFT”), which has flourished since its eruption last year, has just suddenly stopped and now needs to improve to attract the general public and last, according to specialists.

Drop in spending volumes by 75% between February and mid-April

After generating $ 44.2 billion in 2021, “NFT” (“Non-fungible tokens” or “non-fungible tokens” in French), these unique digital assets authenticated on the blockchain (or “blockchain”), the technology that acts as a basis especially for cryptocurrencies such as bitcoin – it experienced a 75% drop in spending volume between February and mid-April, according to company Chainalysis.

Symbol of the mini-crash: the NFT of the first ever tweet in history, bought for nearly $ 3 million in 2021 and put up for auction again on April 7. Its owner expects $ 48 million but, for the moment, the best offer is just over … $ 20,000.

The sale of virtual land in “Otherside”, the “metaverse” (digital universe) of the “Bored Ape Yacht Club”, the most famous club of owners of “NFT”, however, reached in early May several hundred million. dollars in 24 hours. .

For the general public, it is difficult to understand this very volatile market in the hands of a few large carriers called “whales,” these heavyweights who amplify the “NFT buzz” using their influence, according to Molly White, founder of a specialized company site that identifies scams in the world of cryptocurrencies.

So, beyond the fashion effect, on what basis can we rely to define a “fair” price that everyone can understand?

80% scams?

More than “utility”, it is the “status” conferred by owning an “NFT” that seems to determine its value, continues Molly White. The “NFTs” available in a few versions, such as the “Bored Apes”, give access to very closed groups, and are therefore the most expensive.

Crypto-artist “Louis16art” offers to rely on the reputation of the author, on the identity of the previous owners of the “NFT”, on the quality of the work, as well as on the technique used, some more demanding than others. ‘ other.

Other specialists are calling for the creation, in the image of what exists in traditional art, of a database intended for novice buyers and provided by digital art specialists.

Problem: These assets are mostly sold on “Opensea”, a deregulated market. “However, as soon as you have a new technology, you have the scammers who are on the alert,” Eric Barbry, a specialist attorney associated with the Racine firm, told AFP.

In January, the platform revealed that 80% of the images transformed for free into “NFT” on its network were fake or stolen. “Opensea is a huge project, we don’t know what we’re buying there,” observes Olivier Lerner, co-editor of the book “NFT Mine d’or” with Sophie Lanoë.

“Far west”

For Molly White, the market will not be able to attract the general public without stronger “regulation” and “consumer protection”, even if greater scrutiny risks undermining the interest of this market, which has so far been based on strong earnings attraction. .

“It’s the Wild West”, sums up Sophie Lanoë, for whom the explosion of the bubble is however an opportunity to start over “on sound bases”. “Until we have a specific law, we have to adapt the ‘normal’ law to the NFTs”, warns Eric Barbry, for whom there will be an evolution of the regulations “as the maturity of the sector and its development”.

Beyond the security holes and persistent legal “holes”, which can discourage the acquisition of “NFT”, how to simplify the purchase, still complex to understand for a non-tech-savvy public? “Nobody understands anything, but everyone loves it”, Olivier Lerner wants to believe.

To help this market, “as long as the platforms become easy to access”, not asking for a specific portfolio for each type of digital asset, he proposes for example.

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