- The FTX crash significantly affected the entire crypto ecosystem
- According to the NFTGo, the Blue Chip Index is calculated by weighting the market cap (ETH/USD) of blue chip collections to reflect their performance.
- On November 4, 2020, the Digital, Culture, Media and Sports Committee made various observations towards the NFT marketplace. According to their views, the sudden growth of NFT would eventually mean that a sudden rise would bring a sudden drop in value.
Web3 has offered considerable growth, development and innovation opportunities to all who venture into its intricate functionalities. Blockchain technology, digital assets, CBDCs and NFTs are among the core applications of Web3. Its consistent growth over the past decade has resulted in numerous investments. Some include the Metaverse, which combines blockchain technology, NFTs, and AI and some incorporate crypto into their work.
Huge cooperations pioneered these inventions, and despite the few setbacks, everything appeared to function without much of a setback. Unfortunately, the blissful trans was short lives as the recent crypto collapse generally regressed a decade’s worth of work. Many attribute the FTX crash to Crypto; however, the NFT marketplace has not gone unscathed. The drop in sales and rumours of strict NFT regulations are looming above the artistic side of Web3.
How badly was the NFT industry affected
As much as they appear as different entities, all aspects of Web3 interconnect one way or another. The blockchain serves as the backbone of the other entities, while the Metaverse is generally a combination of all aspects of Web3. NFT and Crypto have different attributes and functionality, although they share similar mechanisms, such as intelligent contracts to transfer digital assets ownership.
The FTX crash significantly affected the entire crypto ecosystem. These events eventually and the name crypto collapse since its effects were evident. Big league cryptocurrencies lost a significant portion of their value while stablecoins struggled to maintain their 1:1 ratio. Unfortunately, smaller cryptocurrencies felt the effects much more. This eventually caused various crypto exchange firms to close due to bankruptcy.
Also, Read Africa’s crypto ecosystem affected by FTX collapse
The crypto collapse has caused a ripple effect in the crypto ecosystem and the NFT market. Traders, collectors and even artists’ numbers began dwindling. According to the NFTGo, the Blue Chip Index is calculated by weighting the market cap (ETH/USD) of blue chip collections to reflect their performance.
According to Insider, the Bored Ape Yacht Club dropped from $1.3 million in January to $70,000. This is a clear depiction of where the NFT marketplace. Web3 has had various milestones, although this crypto collapse may be its undoing.
New NFT regulations up in motion
Over the years, one of the critical components that plagued Web3 during its debut was the establishment of various regulations to govern how crypto traders should use digital assets. Especially NFT regulations fall under the same category as Crypto in existing crypto regulations. As a result, various NFT irregularities are noticeable, although no immediate action is taken.
This is either through the minute nature of the problem or merely ignorance. With the recent crypto collapse, governments and organizations have vowed to closely monitor and review existing crypto regulations to ensure that such scenarios may not occur. Many view this as a time to exit the use of digital assets since the applications of more NFT regulation generally will generate a complete change of Web3 and what it stands for.
On November 4, 2020, the Digital, Culture, Media and Sports Committee made various observations towards the NFT marketplace. According to their views, the sudden growth of NFT would eventually mean that a sudden rise would bring a sudden drop in value. This assumption is made on the need for more extensive NFT regulations that will not safeguard its citizens amid the crypto crash.
China has also filed for additional NFT regulations via Hangzhou Digital Technology Company. Amid the crypto collapse, a user claimed to have yet to receive a purchased NFT worth $15000. In response, the company denied this allegation and stated that they did not facilitate the transfer because the information provided contained some mismatch. This has opted the organizations to advocate and seek out new crypto regulations that benefit both the crypto trader and the organization.
Also, read about the dip in cryptocurrencies and the best way for African nations to adopt cryptocurrencies.
Russia has also taken the initiative to establish more digital asset regulations from NFTs and Crypto. Generally, the Bank of Russia has indicated its plan to include digital assets trading into the traditional stock market infrastructure. This applies the various traditional regulations to digital assets. This generally filers unqualified investors around its NFT marketplace by setting an access parameter which requires potential investors to pay 100,000 rubles per year.
Consistent Drop in Value
According to Binance CEO Changpeng Zao stated that the crypto collapse will significantly shake the trust between users and digital assets. According to nonfungible, the NFT marketplace has seen a 77% drop in value from $7.3 billion to 1.6 billion globally. These figures reflect the sheer drop in Web3 users, and the digits consistently drop each day. Experts suggest that NFT artists hold digital assets instead of selling them to avoid significant losses. Although doing so limits the selection available for NFT collects, generally creating a perpetual loop caused by the crypto crash.
Bored Ape Yacht is among the few NFT marketplaces severely affected by the crypto collapse. The current flow of things is merely the beginning of the steady decline of NFTs and their respective marketplace. Has FTX dealt such a decisive blow to Web3, or will it recover? These are the various questions we merely observe.