By March 2022, the NFT market was visibly cooling. Trading volumes on the major marketplaces had declined significantly from the peaks reached in late 2021. Many high-profile collections were trading at a fraction of their initial mint prices. The skepticism that had been mostly drowned out during the boom was becoming the dominant narrative in coverage of the space.
The pattern was familiar from previous bubbles. The rapid price appreciation had attracted speculators with no particular interest in the underlying assets. As prices stopped rising, those speculators left, and prices fell faster. The collections that retained committed holders for reasons beyond price stayed standing. The collections that had traded primarily on the expectation of further price increases collapsed.
What the cooldown revealed was that much of the activity during the boom had been about the trading rather than the assets. The narratives that had supported high valuations, that NFTs would underpin gaming economies, that they would represent ownership of significant digital identity, that they would integrate with virtual worlds in ways that justified high prices, had not actually arrived as products that mattered. The infrastructure was still early. The actual user experiences were generally not very good. The high prices had been speculation about a future that the technology had not yet delivered.
The Web3 conversation around NFTs was the part that received the heaviest skepticism in the cooling market. The grand vision of an internet rebuilt around blockchain-based ownership and decentralised protocols had attracted significant investment but had not produced widely-used products outside of speculation. The technical limitations that had been pointed out by skeptics, around scalability, user experience, and the actual benefits of decentralisation for normal use cases, were harder to ignore as the financial story weakened.
What did not change during the crash was the underlying technology of NFTs as a way of representing digital ownership. The ERC-721 standard still worked. The use cases for representing unique digital assets still existed. The serious projects continued through the downturn, often quieter and with smaller communities, but with clearer ideas about what they were trying to do.
The bubble deflating was an opportunity to examine what was actually being built. Some of what had been hyped during the peak turned out to be mostly speculative noise. Some of what was being built quietly during the same period would matter later, even if it did not produce the prices that had defined the boom.