NFT-Linked Cryptos: Can They Survive the Next Bear Market?

“Over 95% of NFT projects are now worthless.”

That startling conclusion comes from a September 2023 report by dappGambl, which analyzed over 73,000 NFT collections across blockchains like Ethereum, Solana, and Polygon. The data is damning: of the millions of NFTs minted in the last bull cycle, the vast majority have zero buyers, zero liquidity, and zero utility. Despite celebrity endorsements, multi-million dollar JPEGs, and the metaverse mania of 2021–2022, the bubble burst hard—and fast.

Yet amid the ruins, a haunting question remains: Can NFT-linked cryptocurrencies survive the next bear market?

The Rise and Fall: What History Tells Us

To understand the future, we need to rewind to 2021. That year, NFT-related tokens like Axie Infinity’s AXS, Decentraland’s MANA, and The Sandbox’s SAND saw astronomical gains. AXS surged over 20,000% from January to November 2021. Investors hailed these tokens as the backbone of the future digital economy—where play-to-earn (P2E) gaming, digital land ownership, and metaverse interoperability would dominate.

Then came 2022. Terra collapsed. FTX imploded. The Fed hiked interest rates. Global risk appetite evaporated.

AXS plunged over 96% from its all-time high. MANA and SAND fell over 90%. Billions in market value vaporized.

Still, these tokens weren’t just speculative assets. They were—supposedly—backed by ecosystems. But here lies the problem: those ecosystems were hollow.

Case Study 1: Axie Infinity (AXS) and the Illusion of Utility

At its peak, Axie Infinity was the poster child of NFT gaming. Players in the Philippines and Venezuela were earning more than minimum wage through breeding and battling digital creatures. The game’s token economy was fueled by two tokens: AXS (governance) and SLP (in-game rewards).

However, Axie’s model depended on constant player growth and NFT demand. When new users stopped joining and existing players started cashing out, the Ponzi-like structure collapsed.

A 2022 Chainalysis report revealed that Axie accounted for over $4 billion in NFT sales, but by mid-2023, daily users had dropped by over 95%. The Ronin bridge hack—one of the biggest in DeFi history, stealing $625 million—dealt a final blow to user trust.

“There was never a sustainable value proposition,” says Dr. Christian Catalini, MIT cryptoeconomist. “Gamers weren’t playing for fun—they were playing for cash. That’s not a game economy. It’s a ticking time bomb.”

Case Study 2: Decentraland (MANA) and The Metaverse Mirage

Despite hosting digital fashion weeks and land parcels selling for hundreds of thousands of dollars, Decentraland faced a harsh reality in late 2023: Less than 500 daily active users. Yes, a platform valued at over $1 billion had the same active user base as a niche Discord server.

Official reports from the Decentraland Foundation claimed "thousands of monthly users," but blockchain analytics firm Messari debunked this, showing most wallet activity was from bots or developers.

“Web3 metaverses are missing the ‘stickiness’ that real games and platforms like Roblox or Fortnite have,” says Justin Taylor, former Twitter head of consumer product. “You can own land, but who wants to visit an empty city?”

Root Causes: Why NFT-Linked Cryptos Falter in Bear Markets

1. Speculative Value over Functional Utility Most NFT tokens are used for governance or staking—not for accessing real-world value. When hype dies, so does their price.

2. Liquidity Crisis Bear markets dry up trading volume. NFT-linked tokens often have thin order books, leading to illiquidity spirals.

3. Overreliance on Retail Investors These projects typically lack institutional backing, making them hyper-sensitive to retail sentiment swings.

4. Overhyped Metaverse Promises The gap between vision and execution remains wide. Meta (formerly Facebook) spent over $36 billion on metaverse development through 2023 with very limited traction—what chance do smaller Web3 projects have?

Current Trends: Are Things Getting Better?

There are signs of maturation:

• Immutable X and Ronin are shifting to Layer 2s and real game studios, improving scalability and user experience.

• Yuga Labs (creator of Bored Ape Yacht Club) launched Otherside, aiming to blend metaverse real estate with actual gameplay.

• Animoca Brands, a key backer of NFT gaming, raised funds in 2024 to invest in interoperability and cross-game economies.

Still, token prices remain highly volatile, and usage statistics are sobering. According to a 2024 DappRadar report, only 8% of NFT tokens had more than 100 daily users interacting with the protocol.

Can They Survive the Next Bear Market?

Survival will hinge on a few critical factors:

• Actual Utility: Projects must deliver real, sustainable use cases—not just speculative staking or vague governance.

• User Retention: Retaining users through content, gameplay, and engagement—not financial incentives—is crucial.

• Regulatory Clarity: The SEC has started probing NFT sales under securities laws. Projects with clear compliance frameworks will outlast the legal storm.

• Economic Resilience: Building tokenomics that don’t collapse under low demand or declining user base is non-negotiable.

Critical Insights & Unanswered Questions

While some NFT-linked tokens may find footing in gaming, IP licensing, or virtual commerce, the vast majority are speculative instruments tied to hype cycles. In the next downturn, only projects with robust ecosystems, real users, and transparent governance are likely to persist.

In the harsh light of another bear market, what matters isn’t what you own in the metaverse—it’s whether anyone still wants to visit.

Thought-Provoking Questions:

• Can NFT-linked tokens decouple from the hype and build real economic value?

• Will mainstream gaming giants co-opt NFT mechanics, rendering early crypto-native projects obsolete?

• Could the next bear market finally cleanse the NFT sector—or will it extinguish it completely?

The answers lie ahead. But one thing is clear: the NFT token party is over. What’s left is the cleanup—and the reckoning.