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Are NFT markets in a death spiral or ready for a resurgence?

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Nonfungible tokens (NFTs) saw a massive surge in popularity in 2021, accompanied by sky-high prices, but the market has since come crashing back to earth, and it’s unclear whether there will be a resurgence. 

NFTs are unique digital tokens recorded on a blockchain to certify ownership and authenticity. They can’t be copied or substituted but can be transferred and sold by their owner.

According to analytics platform NFTGo, the NFT market cap valued in Ether (ETH) is down 40.59% over the past year at the time of writing, with trading volume down 40.81%.

The market cap in U.S. dollars is down 41.16%, and its volume has dropped 66.77%. At the same time, market sentiment is ranked 13 out of 100, with an overall rating of “cold.”

The NFT market has fallen even further in the latter half of 2023. Source: NFTGo

Arno Bauer, senior solution architect at BNB Chain, told Cointelegraph that from a utility perspective, NFT projects are increasingly adding value and that this growth in functionality is where the future of NFTs likely lies. 

Bauer said the NFT market is showing “promising signs of innovation and creativity,” which holds great potential for the growth and evolution of the tech.

Related: Crypto lawyer about SEC: ‘Problematic to imply all NFTs are securities’

“Market sentiment, cultural shifts towards digital ownership, and the potential for NFTs to be integrated into various aspects of our lives also contribute to a positive outlook for the future of NFTs,” he said.

“While current market conditions might seem subdued, the ongoing innovation and potential for integration with both digital and physical worlds suggest that NFTs have not had their day and that their continued relevance and growth are highly probable,” Bauer added.

NFTs in the long term

As for long-term use cases, Bauer said NFTs will “likely evolve” over time and become increasingly linked to real-world assets, such as property ownership or unique physical goods.

Currently, NFTs have been most successful in the art world, with some selling for tens of millions of dollars.

Digital artist Pak sold an NFT project titled “The Merge” for $91.8 million on Nifty Gateway in 2021, while Mike Winkelmann, also known as Beeple, sold “Everydays: The First 5000 Days” for $69.3 million via Christie’s auction house the same year. 

Blockchain games also use NFTs to represent in-game items such as weapons and armor, and there is speculation the tech will make the jump to mainstream games. Various types of music assets are also being sold as one-of-a-kind NFTs.

Bauer thinks that as more robust technology provides enhanced use cases and ownership security, NFTs will likely become more attractive to mainstream markets.

He speculated that NFTs could link to financial instruments, representing shares in companies or investment funds, and social achievements, where they could symbolize badges of accomplishment in various fields.

“Beyond art, the ability to tokenize unique assets and provide verifiable ownership will create numerous applications across various domains,” Bauer said.

“Collaborations with traditional industries, technological advancements, clear regulatory frameworks and educational efforts can significantly boost NFT utility and adoption.”

“Addressing sustainability concerns could make them more appealing to a broader audience,” he added.

NFTs have the potential to make a comeback 

Jason Bailey, co-founder and CEO of NFT tool and self-custody solution ClubNFT, told Cointelegraph he thinks “NFTs will come back and go mainstream” because crypto and NFTs rebound cyclically, just like previous tech crashes. 

According to data gathering platform Statista, the NFT market is projected to continue growing in revenue, users and market capitalization.

As of 2023, there are 13.95 million NFT users, but that’s expected to hit 19.31 million users by 2027.

However, Bailey believes NFTs currently have some issues, most of which were amplified by rampant market speculation, that need to be solved before NFTs can go mainstream. 

He said NFTs and the ecosystem around them are so complex that almost everyone is still vulnerable to many risks they may not even know about.

“Many of us have been trying to educate and onboard people into the space thoughtfully so they can be safe, but the truth is that NFTs won’t go mainstream until the complexity is replaced with a safe-by-default easy path,” Bailey said.

“For example, the vast majority of people don’t realize that an NFT is almost always at risk in a sense, except for fully on-chain NFTs, which are a truly tiny fraction.”

“The steps needed to protect the art from disappearing, and prevent the NFT from breaking, are complicated, time-consuming and error-prone,” he added.

Related: AI-based tools bring security and transparency to the NFT market

Bailey believes that in the long term, NFTs or similar tech could prove invaluable in validating digital documents such as marriage certificates, diplomas and licenses.

Overall, he thinks NFTs solve too many of the current problems associated with digital ownership — including scarcity, authentication, provenance and provable ownership — to be ignored.

“We need to build infrastructure now, during the bear market, for smoother onboarding and to protect NFT adopters from malicious actors in the next NFT bull market,” he said.

“Once these issues are solved, NFTs will absolutely go mainstream because the train of digital ownership left the station decades ago, and there is no stopping it.”

Meaningful projects could be a game changer for NFTs 

Speaking to Cointelegraph, Andy Ku, founder and CEO of digital content Web3 ecosystem Altava Group, said he thinks the previous highs in the NFT market were based on a hype cycle, so it’ll be hard for an individual NFT to reach such lofty heights again.

According to CoinGecko, many of the top NFT collections have seen significant drops in value over the past year. 

At the time of writing, Bored Ape Yacht Club has fallen by 67.1%, CryptoPunks by 33.2%, Mutant Ape Yacht Club by 59.2% and Azuki by 49.3%.

Ku believes that if we can see more meaningful NFT projects on the market offering tangible benefits to more people, then it’s possible to have the combined volume bring the overall market value up.

Related: What’s next for NFTs and Web3 in the age of the creator economy?

“NFTs should offer value and utility beyond just a digital art or PFP. The two areas I particularly believe in are asset-backed NFTs and a membership NFT,” he said.

“NFT’s core value of being an immutable representation of something is a great fit for assets and membership.”

NFTs for subscription, membership-based models and loyalty programs are starting to gain traction, with examples in hospitality venues and gyms already on the market.

“In terms of asset-backed NFTs, master artworks, real estate and precious metals like gold are all good examples of assets in which people believe,” Ku said.

“NFTs would make a great proof-of-ownership for these assets as well as being extremely portable,” he added.

Cryptocurrency

BTC Price Analysis: Is Bitcoin About to Break Above its ATH and Head to $120K?

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Bitcoin’s upward momentum has weakened as it approaches the key $111K resistance zone, increasing the risk of another rejection.

However, bullish sentiment remains intact, with market participants anticipating a breakout, though a renewed influx of demand is essential for any sustained move beyond the all-time high.

Bitcoin Price Analysis: Technicals

By Shayan

The Daily Chart

BTC continues to face challenges in surpassing the key $111K resistance level, its current all-time high, after several weeks of consolidation. Despite multiple attempts, intensified selling pressure and profit-taking at this level have repeatedly halted bullish momentum, resulting in sideways price action.

Recently, the cryptocurrency dipped below the $100K support zone, triggering a liquidity sweep and collecting the fuel for a potential new leg up.

However, the subsequent rebound has stalled around the $107K mark, signaling weakening bullish strength. If demand returns and buying pressure increases, a breakout above the $111K ATH could materialize. Otherwise, another rejection is likely, pushing the price back toward the critical $100K support in the coming sessions.

btc_price_chart_2806251
Source: TradingView

The 4-Hour Chart

On the lower timeframe, Bitcoin has been forming a bullish flag just below its all-time high, a pattern typically signaling continuation of the existing uptrend.

Following a liquidity grab beneath the lower boundary of the flag near $100K, Bitcoin rallied toward the upper boundary at $107K. Despite this upward move, the price has entered a low-volatility phase, indicating a loss of momentum as it approaches resistance.

Should a breakout occur early next week, a new all-time high is likely. Conversely, failure to hold above the current level could trigger another drop, sending the price back toward the lower end of the flag. Until then, price action remains confined, with both bulls and bears waiting for confirmation of the next directional move.

btc_price_chart_2806252
Source: TradingView

Bitcoin On-chain Analysis

By Shayan

On-chain data from CryptoQuant reveals a sharp decline in Bitcoin reserves held on centralized exchanges, now at their lowest levels in several years.

This ongoing outflow underscores a growing preference for self-custody and accumulation among investors, a pattern typically associated with reduced sell-side pressure and a long-term bullish outlook. A lower supply of readily available BTC on exchanges often sets the stage for potential supply-side shocks during periods of renewed demand.

That said, while dwindling reserves are historically correlated with major bull runs, they should not be viewed as immediate catalysts for short-term price rallies.

Market conditions and liquidity dynamics still play a vital role, and without a corresponding uptick in demand, price corrections remain a possibility. In summary, the exchange reserve trend highlights strong foundational support for Bitcoin, but near-term price action may still be subject to broader macro or technical headwinds.

btc_exchange_reserve_ratio_chart_2806251
Source: CryptoQuant

 

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Disclaimer: Information found on CryptoPotato is those of writers quoted. It does not represent the opinions of CryptoPotato on whether to buy, sell, or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk. See Disclaimer for more information.

Cryptocurrency charts by TradingView.

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Ripple Price Analysis: XRP En Route to $2.4, Here’s The Real Target

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Ripple has been trading within a prolonged descending wedge pattern, roughly reaching the upper boundary. The bullish momentum apears to be insufficient with expectation pointing toward continued consoldiation within this pattern, until a valid breakout occurs.

By Shayan

The Daily Chart

Ripple continues to trade inside a long-standing descending wedge pattern, fluctuating between the $1.6 and $3.3 levels.

After briefly dipping below the psychological $2.0 support, XRP tapped into a liquidity pocket filled with sell-side stop orders, prompting a swift bullish rebound. The price has since recovered and is currently attempting to test the $2.4 resistance zone, coinciding with the wedge’s upper trendline.

However, despite the recent rally, bullish momentum remains weak, suggesting that the current move may lack the strength for an immediate breakout. Unless a decisive surge above $2.4 occurs, XRP is likely to remain range-bound within the wedge.

A confirmed breakout above this structure, however, would signal trend reversal and could open the door for a rally toward the $3 resistance zone.

xrp_price_chart_2806251
Source: TradingView

The 4-Hour Chart

In the lower timeframe, XRP is forming a descending channel structure that resembles a potential bullish flag – a continuation pattern often following an uptrend.

The price recently bounced off the channel’s lower boundary and rallied above the midline before pulling back to retest it, an action that suggests increased buyer interest and accumulation at the current levels.

Following this healthy retest, XRP has surged once again and is now approaching the upper boundary around $2.2. Should the price manage to break through this resistance, it would validate the bullish continuation pattern and likely drive XRP higher toward the $2.4 region, where stronger resistance awaits.

xrp_price_chart_2806252
Source: TradingView
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Are Corporate BTC Piles Good or Bad for Bitcoin?

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This year US corporations have begun stockpiling Bitcoin treasuries in earnest as the race for 21 million BTC tokens continues. This creates enormous structural support for market prices. But is it ideal?

After setting a historic record high around $109,000 on Jan. 21, Bitcoin prices retraced back to $82,000 by mid-April. After that they skyrocketed to another record around $112,000 in May.

Supporting these sea level changes in Bitcoin’s global capitalization is a spree of corporate BTC buys in Q1 and Q2 that signal a paradigm shift in the demand for these highly valued cryptographic hash tokens.

Is it all good news for Bitcoin and cryptocurrencies?

Here is why it may be good:

1. Institutional Validation

Bitcoin price news headlines and searches for cryptocurrency on Google periodically erupt along with bull runs on the currency. Still, not everyone is sure if it is a good idea to invest.

Many investing and financial authorities like NYU Econ. Professor Nouriel Roubini and EuroPac Chief Peter Schiff are skeptical or highly critical of Bitcoin.

It ROIs are in another league entirely compared to US stocks and private placement investments by accredited investors and high net worth individuals. While that attracts many investors, others don’t understand how it is possible or sustainable.

Institutional validation for Bitcoin investing signals signals to investors with a similar view of the world that BTC markets are really on to something. If corporations are hoarding Bitcoin then it’s probably real and safe.

When public companies like MicroStrategy, Tesla, or Square buy Bitcoin, it legitimizes Bitcoin as a treasury asset. Bitcoin is not just a speculative tool for them, but a long-term store of value.

2. Reduced Sell Pressure

In addition to creating a bandwagon effect and fear of missing out among new entrants to crypto markets, the treasury race is locking up supplies and reducing sell pressure.

Basic supply and demand economics dictates this creates price support for the underlying good or commodity. Bitcoin’s brutally deflationary design boosts this effect on token prices.

Corporate treasuries typically buy to hold long-term, not trade. For Bitcoin, Strategy and others have indicated they have no plans to ever sell their holdings.

3. Onboarding Traditional Finance

Corporate adoption creates incentives for developers to build bridges from Bitcoin to TradFi (traditional finance). Because Bitcoin is maintained by software on an open peer network, the field is wide open for app development.

The TradFi layer is excited by the advantages of automating financial services exemplified by Bitcoin’s success. This encourages blockchain developers to build more institutional tools (e.g., ETFs, custody, derivatives), making it easier for others to follow.

Institutional finance has shown some interest in building an Ethereum app layer that offers automated financial services backed by Bitcoin layer tokens.

While this sector is still in its early stages, if it takes off, BTC tokens may be undervalued at current record market prices near historical record highs.

4. Network Effect Growth

In general system theory, network effects describe the growth of ordered phenomena in an organized system along the lines of positive feedback loops.

Meanwhile, in industrial business theory the concept denotes the simple, but powerful tendency of a market, platform, good, or service to increase in value as more participants begin to use it.

Naturally, the more high-profile holders of Bitcoin there are, the more attention and trust Bitcoin gets.

When large, established corporations regularly traded on Wall Street enter the fray, there is more safety and value in numbers.

Bitcoin investment strategist Lyn Alden says that Bitcoin’s network effects support its long term price growth because:

  • It resolves hard forks through market capitalism
  • Developers build new layers like Lightning Network
  • mega companies like Fidelity now serve customer demand with BTC custody services

5. Defensive Hedge Narrative

Corporation are conservative with their finances because they have to make payroll and please investors. If they’re investing in Bitcoin by the half a billion dollars’ worth at a time like GameStop did in May, then it must be a good macro hedge for more conservative investors.

Companies taking a defensive financial posture using BTC reinforces Bitcoin’s role as a hedge against fiat debasement, inflation, and systemic risk. Some leaders in corporate America are beginning to treating it like “digital gold” — a modern reserve asset.

Furthermore, Sen. Cynthia Lummis (R-WY) recently said that she has spoken with Defense Department generals who say they agree Bitcoin is critically important as a national strategic advantage for national security.

6. FOMO Effect on Other Institutions

Meanwhile, as more companies add BTC, it pressures others to consider it or risk falling behind (especially in financial returns or treasury innovation).

At some point the network effect of corporate Bitcoin stockpiles could snowball so far that Wall Street companies must hold some cryptocurrency treasuries to avoid a systemic shortfall against other corporate balance sheets.

This is what early Bitcoin promoter Andreas Antonopoulos once referred to in an episode of the Joe Rogan Experience as “infrastructure inversion.” He argued it would be an inevitable feature of Bitcoin’s success if the crypto were to ever become mainstream.

But here is why corporate BTC treasuries may be bad for crypto markets:

1. Centralization of Holdings

As corporations amass large BTC holdings, power and influence concentrate among a few key treasuries like those at Strategy and BlackRock, to back its Bitcoin ETF issuance.

That goes against Bitcoin’s decentralized ethos if a few entities control major stakes.

While, theoretically, it can’t pose a risk to the system, because ownership is not correlated to network validation and security (hashrate is), it can still have a negative effect. Imagine an entity controlling 5% of Bitcoin’s total supply being forced to start liquidating its holdings.

This is especially troublesome if the entity is a centralized corporation, the operation and control of which, at best, fall within a board of directors or, at worst, within a certain executive.

Moreover, centralization of holdings could deter investors from coming in because of the above concerns alone.

2. Speculative Overreach

In addition to over-centralization there’s the risk of speculative overreach. Companies may be buying to chase hype rather than for sound financial strategy.

Bitcoin bubbles are already bad. But the corporate treasury race could make the ride bumpier for smaller investors by causing more bubbles, steeper rides up, and more drastic corrections.

That could lead to more painful liquidations or bankruptcies in serious market downturns, damaging Bitcoin’s image and reputation with investors. In the crypto winter of 2022, the weakest link in the chain was corporations that held Bitcoin like Celsius, FTX, and others.

3. Price Instability Risk

Bitcoin ownership stratification and choppier waters could make its price more volatile.

For example, large corporate holders may be apt to sell massive amounts of BTC during crises just as they have snapped it up during this rally. That could crash the market due to the size of their positions.

This adds systemic volatility to an already volatile asset. Market participants always have to balance in the outlook for their forward valuations the possibility that a large ship in harbor could set sail.

4. Distorted Use Case

Bitcoin may become seen primarily as a corporate hedge or balance sheet gimmick, not as usable money. This is an ongoing debate among the online community of crypto enthusiasts.

Some like Strategy’s Michael Saylor say Bitcoin’s real role in the global financial ecosystem has emerged as an automated and completely democratic platform for final settlement in scarce digital tokens with a bearer instrument quality.

Others say this distracts from Bitcoin’s original mission of being a decentralized peer-to-peer currency. There is no consumer demand for Bitcoin this way as a daily spender, only financial and investment demand.

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