Yahoo Finance's David Hollerith discusses the drop in NFT volume as tech companies look for the next leg up in the crypto industry.
- From peak levels, according to blockchain analytics firm Dune. It saw weekly volume climb over $6 billion in January. Now it's down roughly 98%, to just over 50 million. But are those trading volumes to be trusted? Let's bring in Yahoo Finance's David Hollerith to break down the numbers for us. That is a steep decline, David.
DAVID HOLLERITH: Akiko, it is. And I think it's fair to say that it looks like the NFT market as we knew it in 2021 is dead. That being said, these markets are not very regulated. I mean, cryptocurrency in general does not have a clear regulatory framework. And I would say NFTs probably have the least clear regulatory framework, from a US standpoint.
And as a result, a lot of the earlier data for-- on transaction volume that I've seen is heavily influenced by wash trading, which is a type of market manipulation where one person or one market participant will buy and sell an NFT or some other asset to themselves, basically making artificial trading volume. That being said, it's so obvious and so apparent in the market that a lot of data measurements, a lot of charters will actually use a wash trading filter for this.
Now, this all sounds pretty bad in terms of the NFT market, as far as what is reliable data. But I think it all boils down to the fact that a lot of this is speculation at this point. And that's obviously, you know, that's disappeared, given the macro environment. And at this point, NFTs need to change and become something else that's not necessarily just speculative investments. And that's sort of the hope, I think, for people who are still interested in, like, the adoption of this asset class.
- David, it hasn't been all bad news in the NFT space. Meta announced earlier that it will let users post NFTs across Instagram and Facebook now. What do you think that means for adoption and trading volumes?
DAVID HOLLERITH: Yeah, Akiko, again, with trading volumes, you know, I think we could see a boost from this. I'm still skeptical about whether or not we should be judging NFTs from trading volumes. User adoptions I-- or user adoption numbers I think is a better way to measure that.
And we've seen those numbers increase. Again, I still am hesitant on the data, but I think that what you expect-- what you want to expect with Facebook and Instagram adding these is that more people will come in and use this kind of asset. And it won't necessarily be about trying to gain a return on investment as much as, like, a new way to share digital items, if that makes sense.
And add to that-- I'll just point out, too, that Warner Music Group actually just an hour ago announced that they're going to be sort of trying NFTs with a number of artists in their music group. And so I think that what's going on is a lot of large companies are sort of trying to float the technology to see if anything sticks in this environment.
- OK. We are still seeing that moving ahead, despite the declines that we've been seeing. David Hollerith, as always, thanks so much for that.