What Is an NFT Bubble & Has It Burst Yet?

Non-fungible tokens (NFTs) are increasingly popular among both crypto investors and artists. Each NFT asset is completely unique, which is what creates its value. Just as with any market, however, it's possible for a bubble to form when prices become so inflated that buyers can no longer justify their purchases. When this occurs, prices can drop substantially in a short period of time as the result of insufficient numbers of buyers and a surplus of sellers. In this guide, you'll learn everything you need to know about an NFT bubble — and whether it’s already burst.

What Is an NFT?

An NFT is a cryptographic asset that's positioned on a blockchain, consisting of distinct metadata and identification codes. Every NFT that's minted is thus unique, which gives the asset its value.

An NFT can't be exchanged or traded for any equivalent NFT. In comparison, cryptocurrencies and other fungible tokens can be traded for one another and used in commercial transactions. NFTs typically represent artwork, digital real estate in virtual worlds and real-world items.

Tokenizing these assets enables them to be traded, bought and sold efficiently. Prices for most NFT collections were at their highest in early 2021. Though prices have since dropped — after the initial surge spurred by Bored Ape Yacht Club and similar NFT collections — the NFT market is still relatively healthy.