The Chinese government, which launched an active campaign against Bitcoin mining a few months ago, is now criticizing the hype around unique NFT tokens.
Local news outlets have reported that government agencies have issued a series of regulations calling the surge in NFT trading volumes and prices a bubble. It’s worth noting that at least two major tech companies in the country – Tencent Holdings and Alibaba Group Holding – have previously supported new NFT initiatives. Let’s talk about the situation in more detail.
We checked the actual data: in recent weeks, the volume of trading volumes with NFT tokens has really been decreasing. If at the end of August trading exceeded the level of a billion dollars, then last week they were equivalent to 311 million.
This means that we are talking about reducing trade volumes by three times in two weeks.
Obviously, this is happening against the backdrop of the recent sinking of the cryptocurrency market, the scale of which is still felt. However, the Chinese authorities disagree.
China hinders cryptocurrencies again
According to Cointelegraph sources, news of the updated course of the PRC government appeared in the local Securities Times, which is closely associated with officials of the Chinese Communist Party. In government publications it is noted that “it would be common sense to consider a sharp increase in the volume of transactions with the NFT bubble.”
In addition, buyers of unique tokens are allegedly more interested in the commercial side of the issue, that is, elementary income from the popularity of the trend, rather than the artistic value of the NFTs themselves. Here is what Wang Junhui, reporter for another Chinese news outlet South Morning China Post, noted about this.
Once the hype in the market dies down, the value of many of these strange NFTs will plummet.
This is most likely true. Still, a lot of strange projects like EtherRock stones, a collection of images of ordinary numbers on a black background or completely empty pictures are associated with the hype around NFT. All of this sells for hundreds of thousands of dollars, which is highly illogical from the point of view of the fundamental value of such digital objects.
Although one can disagree with this approach. Still, NFT is an innovation that is changing the concept of digital property rights, and also allows it to be anchored in an immutable blockchain. Accordingly, even a drawing of an ordinary stone is valuable in that its copy does not exist, and anyone can verify this using the data in the open block chain. And in the future, there will be more and more options for using unique tokens. What is the only opportunity to buy a “autograph” of a celebrity, being anywhere in the world.
The Chinese government’s new initiative is likely to ruin the efforts of tech giants Tencent Holdings and Alibaba Group Holding to seize a local NFT market share. Earlier, Tencent launched the Huanhe trading platform for unique tokens, and also announced its desire to integrate NFT into its QQ Music music service. That being said, Alibaba’s fintech partner Ant Group recently put up two NFT images for sale on its Alipay wallet app.
By the way, the hype around unique tokens has begun to decline over the past couple of weeks. A vivid proof of this is the dynamics of the volume of transactions with NFT on the OpenSea trading platform. According to the service DappRadar, in the last seven days alone, it has decreased by almost 50 percent – from 1.5 billion to 792 million dollars.
The reason for this was probably the market crash on Tuesday last week, when Bitcoin alone fell in price by 10 thousand dollars over the course of the day. In such conditions, experienced investors traditionally become even more cautious. Therefore, the focus of efforts is shifting to preserving funds, rather than trying to make money on a rather risky trend.
Any trends in the cryptosphere have a tendency to a sharp rise and an equally sharp fall – this is clearly seen in decentralized finance, which experienced a boom and bust in 2020. However, it is important to understand that the same tokens from the DeFi world not only revived and updated historical highs of rates, but also became part of global finance – albeit on a small scale. Therefore, it is likely that in the future NFTs will be used actively, widely, and in new areas. However, for this to happen, the sphere must go through the initial stage of explosive growth, which is certainly happening now.
We believe that it is not worth listening to the advice of governments and officials regarding personal investment, as it usually ends up missing out on lucrative opportunities due to over-caution. However, in this case, the reminder of the main party of China may indeed make sense, since the euphoria against the background of the sale of pictures of stones for hundreds of thousands of dollars cannot last forever.
At the same time, we are confident that the NFT token industry will continue to develop. Yet the idea of linking objects from the real world with unique tokens in transparent and immutable blockchains is too revolutionary to be abandoned due to a possible decline in investor interest.