According to Soudagar, 60% to 75% of NFT projects in existence today are scams . In addition, because speculators are driving demand, many will start to “freak out” once the prices of BTC and ETH skyrocket, he says.
“NFT projects where people were mostly in it [to] flip will probably take a hit. And may possibly not recover,” Soudagar, who goes by the handle Matty on Twitter, told his 122,000 followers on the social media site.
“Currently, there’s a big speculator crowd around the NFT market. Many new investors will freak out when prices drop, which creates more selling,” he outlined in a long thread on October 22.
Soudagar believes the NFT industry will evolve into more “polished games and virtual worlds,” but “low effort projects will wash out.”
To the moon
Bitcoin climbed to a record high of $67,000 on October 20 following the approval of the first U.S. bitcoin futures-based exchange-traded fund (ETF). The benchmark cryptocurrency has more than doubled in value since its $30,000 low in late July.
As epitomized by Plan B’s stock-to-flow (S2F) prediction model, analysts expect institutional involvement to drive the price to $100,000 by year-end.
Similarly, ethereum, which also hit an all-time high above $4,000 in the last few days, is seen rising to $10,000 within this fourth quarter.
Meanwhile, NFTs have soared in value recently, with the volume of trades topping $15.5 billion from just a few thousand in 2017, when the buying and selling of tokenized digital artwork started, according to DappRadar.
The sector is dominated by the Opensea marketplace, which has clocked $9.5 billion in total volume, followed by Axie Infinity at $2.7 billion. Both platforms operate on the Ethereum blockchain, as do the majority of marketplaces.
Staying power of the NFT
In his Twitter thread, Soudagar drew parallels between the behavior of altcoins – basically any other digital asset which is not bitcoin – with that of NFTs.
He finds that many NFT projects have “followed the same sentiment” as altcoins – falling sharply whenever bitcoin is on a rally, as money moves away from the smaller coins into BTC.
“Just like alts take a hit when bitcoin or ether reach all-time highs, so will NFTs. The good alts should do well long-term. Just like non-fungible tokens,” he explains. But that’s just for the short term. Matty has worked out different scenarios for those who hodl for much longer periods.
He expects what he calls “good projects” to have the staying power in the event of a crash on non-fungible token prices. “NFT projects where community/team are strong, [and] continue to build can retain interest,” said Soudagar. Art, as well as “super rare/iconic NFTs have a high chance” of sustaining bearish waves to achieve growth, he added.
However, Soudagar doesn’t put all his bets on this happening. He also proposes the alternative, where NFT prices will rise should the anticipated crypto bull run last for a few months.
It has happened before. At the beginning of this year, when NFT prices ran on nothing else but the euphoria and frenzied mainstream media coverage.
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