Let the macro agency Real vision tell you, is the NFT bear market coming?

Editor's Note: During the recent market crash, the NFT secondary market, which has always been separated from the encrypted secondary market, also experienced violent fluctuations. The mainstream NFTs led by Boring Ape and Azuki all fell by more than 20%. Coupled with the decline in the popularity of PFP, the market has not seen projects that can make players flock for a long time, and the view of "NFT entering a bear market" began to spread. In this email from Real Vision, the macro agency shared its views on the current NFT market, which BlockBeats translated as follows, hoping to help readers.

Have we entered a bear market for NFTs? If so, how should we respond? Now let's jump right into the subject.

Below is a snapshot of NFT transaction volume on Dune Analytics over the past few months:

Technology

NFT sales have been on a rapid downward trend since mid-February. This doesn't have much to do with the war that started on February 24, when sales instead increased.

In the past week, several major NFTs, including Bored Ape Yacht Club, CloneX, Doodles, Azuki, NFT Worlds, World of Women and Cool Cats, have seen a 20-35% drop in floor prices.

So, what is the reason for this bear market?

Guess One: Overstated Tax Loss Collection Releases Pressure
Compared with December 21, the NFT transaction volume has shown a sharp rebound since January 22. Many believe the surge in volumes is largely due to the easing of seller pressure from tax-loss collections. (Rhythm Note: IRS policy)



In theory, NFT market participants want to unwind their losing projects in order to enjoy tax benefits in the next annual report. This situation partly contributed to the market depression in the latter part of the fourth quarter of 2021, and although various market activities were still carried out in an orderly manner, prices suffered a cold snap.

After entering 2022, the seller's pressure is relieved, and the NFT market as a whole begins to recover.

However, do people buy NFTs again because they are no longer worried about tax issues, or because they are afraid that others will resume purchases without considering taxes?

While we can't answer that question yet, this might also shed some light on the question at the beginning of our article, namely, if we're in a bear market, what's the reason?

I think the answer may be that the increase in NFT transaction volume in January was not a continuous rise, but just a temporary peak.

Therefore, perhaps the NFT market has not suffered a bear market, but has just returned to normal after a period of rising.

Guess 2: The market peak may have come
Compared with the previous speculation, this theory holds a negative attitude towards the NFT market.

If you know about emerging technologies, you must have seen the picture below when NFT prices fell.

Technology

This graph shows the Emerging Technology Hype Cycle Curve created by Gartner, Inc. The 2021 edition of the graph also adds NFTs and Decentralized Identity. This cycle is generally used to demonstrate the use of emerging technologies. While some people often use this chart to predict market trends, I won't draw conclusions about it. In my opinion, what we should be exploring is the possibility that the NFT market has peaked after a one-year upswing.

Let’s analyze the first two phases of this chart and what they each mean in the NFT market.

A. The enabling period of the birth of technology - digital identity and mainstream utility
Some believe that as early as January 2021, with the popularity of NBA Top Shot, the bull market for NFTs has already begun.

Someone made a lot of money on NBA Top Shot, but when Dapper Labs decided to keep increasing the supply of "Moments", the price took a serious dip. For the largest holders, the asset is down more than 75% in value from its portfolio's all-time high.

Unfortunately, those smaller NBA Top Shot holders opted out of the NFT market, partly because they ran out of money to invest in other NFTs, and partly because their confidence was frustrated and they didn't want to continue to grow in the NFT market .

Those who hold more NBA Top Shots have also suffered some losses, but they have made enough money to continue investing in other NFTs. These folks turned their attention to other NFT projects such as CryptoPunks and later Bored Apes.

So below we will discuss the second part of the first phase of the NFT technology maturity cycle. If Top Shot was the first mainstream use case, the Boring Ape Yacht Club was the first project to use NFTs as community members to suggest digital identities.

The fire of the boring ape is mainly due to the following two things:

1. As we just mentioned, this club is the first NFT project that allows NFTs such works of art to be used not only as anonymous digital identities, but also as club members. Therefore, although the boring ape is indeed very cool in the eyes of many people, in fact, the exclusive privilege it brings is the real reason why people like it.

2. The popularity of metaverse knowledge has further boosted the market by making people more convinced that the Boring Ape (and other NFT avatars) can be their appearance in the virtual world.

Soon, this statement became: "There will be a billion people living their day in the metaverse in the future, so everyone needs an NFT digital avatar. So, who can launch a good NFT project as soon as possible, Whoever will be worth soaring in the future.”

So that's why the NFT market was flooded with cartoon animals and profile pictures last summer, but obviously we don't need to discuss why the prices have gotten so high after that.

The only problem is that none of the metaverse platforms yet (Decentraland, The Sandbox, Somnium Space, etc.) can give us the metaverse experience we expect.

With that in mind, the question then becomes, should these digital avatars that sprung up last year continue to stay at these price levels until the metaverse is truly built? It would take at least 6 to 7 years to build a fully functioning metaverse.

So we enter the second stage of the technology maturity cycle.