Following the latest decline in the crypto market, Morgan Stanley warns investors in other digital assets about the risks of a fall. However, experts suggest that the fortunes of NFTs now depend on around “blue-chip” NFT collections, like CryptoPunks and Yuga Labs’ Otherside.
According to last week’s report, the steep declines of Bitcoin, Ether, and other coins were not tied to the decline in equity markets. Instead, wrote crypto analyst Sheena Shah, the higher prices were due to investor “speculation, with limited real user demand,” Coindesk reported.
That speculation, the report said, isn’t limited to cryptocurrencies. Both NFTs and digital real estate in the metaverse have been just as vulnerable to speculation, which raises concerns for both.
As per Shah, many people bought NFTs with the expectation that they could sell them for a higher price to another buyer, and that’s not happening now, with a few exceptions.
The start of this year was tough for the NFT market. According to a May report from Chainalysis, total NFT transaction activity was down from $3.9 billion to $964 million between mid-February and mid-March. However, recent high-profile NFT collections like Moonbirds, and the metaverse land sale for Otherdeeds, which is associated with the Bored Ape Yacht Club, did major business.
According to Modesta Masoit, finance director at NFT ranking platform DappRadar, NFT trading was mostly centered around “blue-chip” NFT collections, like CryptoPunks.
“NFTs look to be entering perhaps one of many maturity stages,” Masoit told Fortune. “We expected this and believe it’s a normal development in such technology.”
The fortunes of NFTs are in many ways encapsulated by Otherside, an upcoming metaverse developed by Bored Ape Yacht Club creators Yuga Labs. Yuga Labs on April 30 dropped NFT land deeds for Otherside, with just under $1 billion being spent on the virtual land in the 10 days since.
As CNET noted, the upcoming metaverse highlights the evolution of NFTs. NFTs are mostly used as digital status symbols, but Yuga Labs is hoping to turn its Bored Ape brand into a mainstream AAA game. It’s not the only one, as dozens of NFT creators are hoping to sail from OpenSea into your living room. Whether a few can succeed or not will say more about the long-term viability of NFTs than a slump brought on by an interest-rate spike that’s impacted most other indexes.
Last week, Morgan Stanley was also taken by surprise by the collapse of the TerraUSD stablecoin, Shah said, noting that it has resulted in a “broader re-evaluation of where many crypto prices should be trading at.”