How will the crypto selloff impact the NFT market?

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major cryptocurrencies are There is a decline in the current stable prices from already suppressed levels. It’s a sell-off, though probably not enough to shake the confidence of crypto loyalists. Nevertheless, the impact of declining crypto prices on assets priced in crypto should prove interesting.

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nft market, Largely built on the Ethereum blockchain, has seen a rapid increase in value and trading volume, as the value of Ether, its chain’s native token, has been widely appreciated. What will happen to NFTs in a market where Ether is falling? Let’s talk about it.

How many sales?

In the past week, bitcoin is down 8.6%, ether is down 7.8%, and solana’s token is down about 12%. Per CoinMarketCap data, Those are sharp downsides even for the more volatile crypto market. From recent highs, the decline is even sharper. From the all-time highs set during Q4 2021, bitcoin is up about 35%, ether 28%, and Solana’s token is up around 40%.

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what’s going on? The Wall Street Journal has a very succinct explanation Today:

The bitcoin and ether-led cryptocurrencies fell as part of a broader technical sell-off, cementing their position among investors as the risky asset was quickly dumped in moments of market tension.

The decline was triggered by Federal Reserve minutes showing officials were eyeing a faster timetable for raising interest rates this year. As rates rise, volatile investments that generate less income than government bonds become less attractive.

Simply put: As rates rise, assets with less risk become more attractive in terms of yield; This makes the riskier asset less attractive and hence has a lower price. Fall in value of high-growth software stocks The crypto market is likely to be driven by similar dynamics. Bitcoin is not an uncorrelated asset, it seems clear at this point.

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But what does all this mean for NFTs? some things.

Prices, Trade and Correlations

There is no single motivating factor for the surge in NFT price and trading activity. Instead, myriad inputs are in play, from celebrity participation to improvements in technology, better public awareness and more.

Furthermore, I would argue that there has been a sharp appreciation of Ether over the past year or so. In mid-2020, Ethereum tokens can be bought for less than $250 each. Ether has tripled in value by the end of the year, reaching $4,700 last year. That huge acclaim led to the creation of a huge amount of paper – tokens? – Property. In short, those holding Ether enjoyed very quick, huge rewards.

More than anything, from my point of view, the money generated by the appreciation of Ether gave rise to the NFT boom. After all, I don’t think people are transferring millions of dollars In Ether to buy digital signatures on the blockchain related to particular images; Instead, I think we are seeing ether-rich people gambling on non-traditional assets to make them feel like home money. Not that it’s a bad thing; It’s neutral, I think. But it raises the question of what happens to both NFT activity and NFT prices when their subsidiary asset, if we may say Ether, rapidly loses value.

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