Crypto Winter Eventually Comes for All, Even NFTs

Welcome to Bloomberg Crypto, our twice-weekly look at Bitcoin, blockchain and more. If someone forwarded this to you, sign up here. In today’s edition, Emily NicolleHannah Miller pierce the hype around NFTs:

Eat, drink and hype NFTs 

If there was ever a place to fully appreciate the wealth and hype behind NFTs, it was in New York last week. Hordes of fanatics descended on the Big Apple to celebrate the industry, as companies splurged on exclusive nightclubs, collaborations with designers and even a headline performance by Madonna as part of the three-day NFT.NYC event. 

All this was happening as the broader crypto market was buckling under an intense liquidity crunch, creating spates of job losses and lost portfolios. But beneath the hype, data show the market for NFTs is getting hit just as hard.

As our colleague Olga Kharif reported on Wednesday, the overall NFT sector is set to record its first month with under $1 billion in sales since June 2021. Sales volume on OpenSea, the largest nonfungible-token marketplace, has fallen 75% since May, while the price floor of even a top-selling collection such as Bored Ape Yacht Club has fallen nearly 33% in the last month.

In their early iterations, NFTs were thought of as a burgeoning asset class where an investor could quickly grow their wealth, if they made the right purchase. Now they’re being repurposed into other industries to expand their appeal — such as in the music industry where Napster recently re-oriented itself around using digital tokens for fan experiences.

Certainly, the market has significant funds to help tide it through crypto’s winter season. The Sandbox, a metaverse firm which hosted the Madonna event, raised $93 million from SoftBank Vision Fund 2 in November and was said in April to be hunting for more. Its majority owner Animoca Brands held roughly $5 billion in crypto in April, with a cash balance of $98 million. But those stockpiles may be threatened should crypto’s bear season persist.

To date, the loud chants of the industry’s hype machine have long been the strongest thing to power up prices. As losses deepen, though, proponents may increasingly find themselves growing hoarse in a vain effort to drown out the roar of the rout. 

Charting it out

Hearing them out

What we’re reading (and writing)

• Razzlekhan, Dutch and the Biggest Crypto Heist Gone Wrong
• FTX Nears Deal to Buy Crypto Lender BlockFi in Likely Fire Sale
• Pitched as Safer Than a Bank, Crypto Giant Proved Riskier (Wall Street Journal)
• Nvidia Graphics Card Prices Fall Along With Crypto Mining Demand
• How North Korea Used Crypto to Hack Its Way Through the Pandemic (New York Times) 
• Crypto Loves Its Shadow Banks: Matt Levine (Bloomberg Opinion)

Thank you for reading. We welcome all feedback at [email protected]

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— With assistance by Suvashree Ghosh, and Vildana Hajric