Crypto executive Ryan Carson recently warned that a "massive NFT crash" — not dissimilar to the implosion of ICOs — is on the horizon.
U.S. regulators are scrutinizing the non-fungible token market amid concerns that some of these collectibles may have broken securities laws.
Fractional NFTs, where an asset is broken down into smaller chunks that can easily be bought and sold, are set to be an area of particular interest.
The Bloomberg report said SEC lawyers have sent out queries and subpoenas, but did stress that this doesn't always lead to enforcement action.
Initial coin offerings — which exploded in popularity back in 2017 and 2018 — faced similar scrutiny, with some projects being handed multimillion-dollar fines.
If an NFT is defined as a security, it would fall under the same rules as stocks. The diverse mix of digital collectibles released in recent months has prompted officials to warn that some non-fungible tokens may fall into this category — and indeed, marketplaces have been taking steps to avoid listing projects that might land them in hot water with the SEC.
A Double Blow
All of this comes as data from CryptoSlam! suggests that demand for NFTs has cooled substantially over the past 30 days.
Its data includes that sales during this period stood at $2.8 billion — down 32%. However, demand for fan tokens has rallied by 55% over the same timeframe, with the value of transactions hitting $1.7 billion.
Which NFT collections are hot (and which ones are not) regularly chops and changes. Bored Ape Yacht Club has seen the total value of its sales plunge by a whopping 60% over the past 30 days, down to $111 million overall. CryptoPunks fell by a more modest 20%, with Axie Infinity declining by 20%.
In fairness, February's figures were always going to be tough in comparison to January, which broke records for NFT demand even as the crypto markets withered.
Data from Dune Analytics shows that monthly trading volume on OpenSea, the world's largest NFT marketplace, stood at $4.95 billion for the whole of January — eclipsing the previous all-time high of $3.4 billion that was set in August.
While February's total volumes came in at $3.6 billion — still enough to be the second-best month on record — that was a 27% fall compared with January.
Crypto executive Ryan Carson recently warned that a "massive NFT crash" — not dissimilar to the implosion of ICOs — is on the horizon, and he predicted that it will happen six months after Coinbase launches its marketplace to the masses.
He believes one-of-one pieces by renowned artists, NFT projects that offer membership to exclusive clubs, and early projects such as CryptoPunks and Bored Ape Yacht Club will be among the few categories that prevail.