GameStop's (GME -2.47%) current turnaround strategy is still pretty opaque to investors, but what we have seen has been primarily centered on non-fungible tokens, or NFTs, the digital ledger technology that imparts an ownership or usage right to a digital asset.

In May, the video game retailer launched GameStop Wallet, a self-custodial Ethereum wallet that a user controls and can access without leaving their browser, following that up in July with an NFT marketplace where tokens can be bought and sold.

It remains a mystery exactly how GameStop will survive, let alone thrive, in a video game industry increasingly transitioning to digital and downloaded gameplay. But chairman Ryan Cohen seems to believe it includes riding the trendy cryptocurrency and NFT markets.

Unfortunately, it also looks as though the NFT idea may be a failure, and it puts GameStop's own future in doubt.

Crumbling crypto

Cryptocurrencies and NFTs are in free fall. Bitcoin, the largest crypto by market value, has crumbled 60% in 2022 to $19,000, while the second-biggest crypto, Ethereum, is down 64%. Volumes on NFT marketplaces are also collapsing, with Opensea, the most popular marketplace, seeing 90% of its volume evaporate through August.

GameStop's marketplace isn't faring any better during this crypto winter. The platform got off to a fast start its first week in business, generating just under $2 million in first-day transactions, and the top 50 collections saw more than $7.5 million worth of transactions the first week. But that was about as good as it got.

Based on fees of 2.25% GameStop charges on transactions, GameStop NFT enjoyed about $44,500 in income on sales volume of $1.98 million on its very first day of operation. Cointelegraph, however, reports that the NFT fell to a little over $3,750 in daily revenue on volume of $167,000 by the end of August, and it's plunged further since then. Data from Dappradar shows that in the past 24 hours, volume is down to $85,000, which equates to fee revenue of just $1,912 per day. Average pricing is also falling, down 22% over the past month.

If GameStop were hoping NFTs would provide some floor for it until it figured out what to do with its video game retail business, it seems to be crumbling.

NFTs' diminishing role in gaming

NFTs generally are falling out of favor, and even in GameStop's primary business, gaming companies are suddenly backing away from their embrace of the technology.

Bloomberg notes studios dove headfirst into NFTs at the height of their popularity, believing the tokens could provide a way for gamers to own their in-game digital bounty won or bought while providing a new revenue stream for themselves. But now they're running away from it.

Minecraft developer Mojang has banned companies from creating NFTs for its game and refuses to allow Minecraft worlds from being built on blockchain networks, reversing previous decisions to explore their potential. Ubisoft, creator of some extremely popular titles such as Ghost Recon and Assassin's Creed, has also backed away from pursuing an in-game NFT marketplace.

Bloomberg says that after Take-Two Interactive bought Zynga for its blockchain potential, it has studiously avoided discussing it in every quarterly earnings conference call since.

If gaming companies want little to do with NFTs and crypto, how will video game retailer GameStop make it a viable part of its own business?

A foundation built on sand

All this doesn't bode well for the retailer's future. GameStop has only survived this far because it wisely took advantage of its meme stock status and raised a ton of money to pay off its debt. So although it is consistently losing money at the moment ($267 million this past quarter), it's not about to deplete its bank account anytime soon (it still has almost $1 billion in cash and equivalents).

Despite that, GameStop needs to come up with a realistic vision for how it will make its business grow. NFT marketplaces and crypto were always risky ventures to build a recovery upon. Now that even gaming companies are backing away from them, investors can better see that it's best to stay far away from GameStop's stock until it brings a viable plan to the table.

This article originally appeared in The Motley Fool.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Take-Two Interactive. The Motley Fool recommends Ubisoft Entertainment and recommends the following options: long January 2023 $115 calls on Take-Two Interactive. The Motley Fool has a disclosure policy.