Key facts:
One in three NFT projects fails, leaving their investors with a worthless product.
NFTs and ICOs, at the time, are not the only factors that could have affected Bitcoin.
Collections of non-fungible tokens (NFTs) have captured the attention of investors in the Bitcoin ecosystem, much as ICOs (initial cryptocurrency offerings) once did in the past. The problem is that, just as it happened years ago, shortly after the bubble of these products burst, Bitcoin and the cryptocurrency market collapsed.
At the end of March of the current year, Nansen, an analysis firm on cryptocurrencies and related projects, published a Article in which mention the evident decline of a number of projects related to NFT collections throughout the last few months.
According to Nasen, one in three NFT collections ends up dying after periods of partial or total inertia in the market. Most of the time, the few copies of these collections that are sold on the secondary market do so below their issue price or mint. This implies monetary losses for its investors, but also a loss of confidence in this type of project in general; which ends up affecting the entire cryptocurrency ecosystem, led by Bitcoin.
NFT Market Crash Stumbles Bitcoin
Coincidences are perfectly possible phenomena in the world of finance and technology, but when the synchronicity between two events is great, it is not unreasonable to think that there is a relationship between the two.
If you compare the price graph of Bitcoin, between October 2021 and March 2022, there are similarities with the graph of sales in primary and secondary markets of NFT in that same period of time.
When comparing the previous graphs, it is noted that, despite not having an exact correlation, the fall in sales of non-fungible tokens and that of the price of Bitcoin start from almost identical points and maintain a similar angle in their descent.
The simultaneous fall of both markets, the cryptocurrency market and the NFT market, suggests that they could go hand in hand. The serious question: who dragged whom to the ravine?
As difficult as it may be to come up with a 100% accurate answer, evaluate for a moment the stage of development in which both instruments (Bitcoin and NFTs) are and the maturity of the communities that make up these niches can be very helpful in reaching a conclusion.
Bitcoin vs. NFTs
bitcoin is defined by Satoshi Nakamoto himself (creator of this instrument) as electronic money that, like cash, can be transferred directly from person to person (P2P). It is also a technology that has almost 14 years of history.
Bitcoin also has a global community that has matured in its use of this financial instrument and has survived a number of bearish waves in the market. Especially the bitcoiners who started at an early stage, between 2008 and 2014.
Added to this, the development at the technological level of Bitcoin is becoming elder. Improvements and tools like SegWit, Taproot, the Lightning network, among others, add layers and layers of security, privacy, usefulness, and efficiency to this network.
The fact that favors Bitcoin the most, when compared to tools such as NFTs, is that its network is decentralized. Something that makes it one of the worst enemies of governments and regulatory entities, since it does not depend on or need them to function. This diminishes the control that these organizations have over the economy and even over the people; that, by having BTC in a wallet guarded by itself, it becomes its own bank.
NFTs take a different approach than Bitcoin in many ways. One of them precisely has to do with decentralization, since most NFT collections are hosted on centralized cryptocurrency networks or they are projects created and promoted by companies or individuals. In addition, being a product that could be considered a derivative of Bitcoin, it is much newer and needs to evolve at a technological level before reaching a level similar to that of BTC, if it ever gets close enough.
This technology has been the gateway for many people to the world of cryptocurrencies, especially what is related to NFT and P2E games (play to win money, for its meaning in English). This factor also works against it, since a good part of its community has little knowledge regarding the use of cryptocurrencies and blockchains, as well as little experience with the fluctuations of its market.
Bitcoin vs. ICO
Between the years 2017 and 2018 there was an instrument that, similar to what happened recently with NFTs, caused a stir among investors, the initial coin offerings or as they are known by their acronym in English, ICO.
During the ICO fever, an innumerable amount of tokens and cryptocurrencies were born without any sense, just to follow the trend of “developing” such an instrument. Worst of all, many of these projects managed to dupe thousands of people who ended up losing large sums of money.
Around that same time in late 2017 there was unprecedented growth in Bitcoin and the cryptocurrency market in general. Bitcoin for the first time reached USD 20,000 per unit, after starting 2017 around USD 1,000. Along with BTC, a host of altcoins saw their market capitalization grow.
To the bad luck of those who invested at the top of the price, the markets began to collapse throughout 2018.
Just as a similarity could be seen in the charts of Bitcoin and the NFT market between 2021 and 2022, too a correlation can be seen between the graph of money raised by ICOs in 2018 and that of the price of Bitcoin during the same year.
There was a clear investor outflow and sell-off of Bitcoin and altcoins back then that were not necessarily triggered by ICOs. However, seeing a situation reoccur where a new cryptocurrency-related instrument loses people’s confidence and a sharp drop in the market repeats itself, it makes a lot of sense to tie up the loose ends connecting the two scenarios.
Bitcoin is not the enemy, but it will still fight every battle
ICOs and NFTs are not intended to destroy BTC. The problem with these tools is the level of popularity they reach while they are presented without any type of educational accompaniment to the people. That is the formula for the disaster that ends up dragging everything in its path with it. Unfortunately, the relationship of NFTs and ICOs with Bitcoin has been the nexus that prevents it from escaping its impending doom.
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