Sales of non-fungible tokens dropped sharply in the third quarter, according to blockchain tracker DappRadar, as crypto investors hunker down for a "crypto winter" and demand for the highly speculative digital assets shows little sign of returning.
Non-fungible tokens (NFTs) are a kind of blockchain-based asset representing a digital file such as an image, video or item in an online game. They exploded in popularity in 2021, as crypto-rich speculators rushed to cash in on rising prices, but sales volumes have slumped in recent months.
The third quarter of 2022 saw $3.4 billion in NFT sales, down from $8.4 billion the previous quarter and $12.5 billion at the market's peak in the first quarter of the year, DappRadar said.
While the nascent NFT market benefited from cryptocurrency price gains and high risk appetite among investors in 2021, these conditions have turned sharply in 2022, as central bank rate rises prompt investors to ditch risky assets. Bitcoin is trading around $19,000, down from its November peak of $69,000.
Sales on the largest NFT marketplace, OpenSea, fell for a fifth consecutive month in September.
"I think what's unique about this environment is it's the intersection of both the macro economic downturn and the crypto winter," said Devin Finzer, CEO of OpenSea, which is backed by investors including a16z.
"The previous crypto winters were a little more isolated to just crypto prices so for that reason, I think it's wise to be conservative about how long this could last."
But he said the company is in a "good spot financially" and he is excited about the potential of NFTs in the longer-term, describing the downturn as a "building phase".
Weekly NFT buyer numbers have more than halved from their peak in late January, according to market tracker NonFungible.com.
While the traditional art market was quick to embrace the craze, sales numbers have dried up, with NFT sales at Christie's, Sotheby's, Phillips and Bonhams combined at 8.4 million pounds ($9.41 million) year to date, down from 127 million pounds the same time last year, according to data from Art Market Research.