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The current NFT market landscape
Non-fungible technology is impressive and here to stay.
Gaming and PFP generative collections are the main categories in the NFT space. However, many NFT projects are simple funding schemes with no real value or utility backing the digital asset.
Gaming NFTs are usually in game consumables or open editions with little uniqueness to them. They maybe be useful for a gamer but as a financial instrument they almost totally result in a loss to the investor.
Generative collections have produced impressive gains during the bull market, but now that we are experiencing a market that lacks liquidity, over 90% of these investors are at a loss.
Their problem is easy to spot...
The most common for these projects' self-proclaimed utility has been community building, the flagship utility of major NFT brands. But from a financial perspective, these result in a poor investment excuse.
Most of the projects made into NFTs are based solely on promises of building a community first and finding utility later. Nevertheless, without REAL utility, a sustainable business model is not possible. These projects must then rely on their community and aftermarket sale royalties to stay afloat.
These projects cannot create an enduring liquidity market without a sustainable business model.
Over time this results in decreased aftermarket sales volume; with investors constantly pushing the project's floor price lower. Then they will be able to exit their positions independently of their investment results.
This generalised lack of utility and reduced liquidity creates a systemic problem for NFTs.
Problems are also opportunities. NFTs, as we understand them, are still in their nascent stage.
More and more traditional businesses are using NFT technology to onboard themselves and their customers into web3. For context, today, 4% of Americans owns an NFT.
Furthermore, despite a current global downtrend of interest in volatile assets; investors are still actively seeking new innovative NFT projects.
Even at the current lows, global NFT market numbers are impressive.
Current market conditions enable projects to legitimise their business models with new design paradigms, capturing the attention of savvy investors who are ready for the next wave of NFT adoption.