Why and How NFTs Should Decouple From the Broader Crypto Market
Non-fungible tokens (NFTs) and cryptocurrencies are both products of blockchain technology. So naturally, the two are linked. In fact, NFTs are considered not so much a separate market but an extension of the older, much more established crypto market. When most people hear the word NFT, they think of crypto.
But NFTs are separate assets in their own right. So, this attitude can and has been a problem for the development of NFTs. How?
The massive overlap between NFTs and crypto markets means that the space ends up being more attractive to people who want to speculate on blockchain assets than to the average person.
The problem
NFT speculators are primarily crypto traders. Given how small the market still is, they have ended up dominating most of the value in the market. They are essentially whales. And whales are always waiting for sell signals. They see NFTs as another tool to turn a profit– nothing more than “shitcoins with pictures.”
What this has done is make the NFT market sensitive to happenings in the cryptocurrency market. Any event that shifts the crypto space influences the attitude of crypto whales and traders. This will ultimately be felt in the NFT space.
A good example would be all recent crypto collapses: the May 2022 Luna collapse, July 2022 3AC collapse, and the November 2022 FTX fraud. None of these projects had anything to do with NFTs — they were all large cryptocurrency firms. However, given the overlap between crypto and NFTs, their failures were felt in the NFT market.
Crypto speculators tried to exit the space, causing the value of many NFTs to bottom out. The public, seeing this, also lost confidence in non-fungible assets. Just like with stocks, NFT prices take the stairs up but the escalator down. Predictably, this soured the mood surrounding NFTs causing projects to delay announcements and cancel new drops.
This seems natural because NFTs are, after all, paid for and valued in cryptocurrencies like ether (ETH). But, one just needs to look at the closest thing to NFTs in Web2 — in-game collectibles like Fortnite skins. This will reveal that the situation is exclusive to Web3.
In Web2 gaming, collectibles are paid for in fiat. What’s interesting is that the threat of a looming recession doesn’t seem to affect the value of these collectibles or the general attitude of gamers who buy them. In fact, the number of people buying skins and coins is growing.
With this in mind, why should crypto collapses affect the NFT market?
Simple. They shouldn’t.
The sooner the NFT market decouples from the mainstream crypto market the better. This, of course, doesn’t mean total separation. NFTs will always be part of the broader blockchain economy. They will still be valued and paid for in crypto.
By decoupling, we mean that the space is able to stand on its own. It will exist as a separate market rather than an extension of the crypto market. That way traders and speculators no longer have so much influence on NFTs. At the same time, creative types won’t have to keep track of interest rates, bond mismatches, or audited exchange financials in order to launch their projects.
How NFTs can do this
NFTs will have decoupled when they start attracting more consumers than traders. These ‘consumers’ are people who want digital assets for reasons other than speculation.
Attracting them is quite simple — projects need to create better NFTs. Better non-fungibles are digital assets with real utility. They have a value proposition other than their future price, allowing them to appeal to people with little interest in trading.
Crypto traders, especially whales, may still find their way into the market. But the ratio of users to traders will be very high — greater than ten thousand consumers for every crypto whale. That way, whatever happens in the broader crypto space will have little impact on NFTs.
Fortunately, such a market is not far away. Big brands like Reddit and Starbucks are ramping up their own large-scale NFT projects. These can potentially reach millions of consumers, bringing us closer to a more independent NFT market.
And here at Clopr, we’re doing our part to make this goal a reality by bringing utility and usability to all NFTs. Our CloprBottle NFTs operate on the concept of external utility. By channeling the power of storytelling, they allow existing NFTs to own NFTs, making them more appealing. StoryPotion, which mints StoryNFT, is just the first potion to show people what an NFT owning an NFT brings to the market.
Join the Clopr Discord to become part of this exciting project or read our whitepaper to learn more about what we have in store.
