NFT Volume Drops 95%
VYSYN Ventures Weekly Insights #55 — What is next for NFTs after their sharp fall?
In the recent crypto market pullback, one asset class that has experienced a particularly significant decline. Non-fungible tokens (NFTs) had a great height to fall from, after taking the world by storm in the early months of 2021. Trading volume for the asset class has dropped by over 95%.
Legendary digital artists like Beeple played a huge role in the initial spike in interest and volume in the asset. Beeple, and several other household names, acted as advocates for the utility of NFTs, spurring significant price movements and trading volume.
In the latest VYSYN release, we consider the recent drop in volume in the NFT market. We also detail the key factors that impact this quickly developing market.
Exceptional Q1 2021 for NFTs
Q1 2021 was a quarter that had a series of highlight reel moments for NFT assets. A collection of NFTs licenced by the NBA generated significant interest in the asset class. The NBA Top Shot series attracted daily trading volumes of over $32 million.
NBA Top Shot was not the only NFT series that attracted significant capital. A record $69 million NFT sale was carried out for a single artwork by Beeple. These events contributed to an explosion in NFT awareness that was created for NFTs, causing a spike in Google search volumes.
During Q1 2021, the amount of sales in the NFT market already outnumbered $2 billion. This included sales in different kinds of digital art and collectibles. Artworks, music, gaming, sports, and many other industries contributed to these sales, as the influx of users into the NFT ecosystem continued to grow significantly.
The offshoot of this growth also spread to other aspects of the cryptocurrency industry, especially to alternative Dapp-creation platforms, as gas fees on the Ethereum blockchain skyrocketed. Many NFT projects adopted Polygon, Binance Smart Chain (BSC), and other Dapps creation platforms to address this rise in fees.
Volume dwindles but Axie Infinity persists
Volume in the NFT market has since dwindled. Only $34 million has traded on NFT Top Shot over the past 30 days, a volume figure that was almost reached within a single day in Q1. NFT gaming Dapp Axie Infinity has since moved to the top spot in terms of trading volume. Axie Infinity has found a strong use case in developing countries where some are using the platform to earn a living. Axie Infinity is one of the few platforms that continues to record strong growth with an over 340% increase in trading volume over the past 30 days.
Despite this performance by Axie Infinity and a few other NFT projects, the overall performance of the market remains bearish. Some believe that this slump is only a phase in the development of the NFT marketplace. One of the reasons behind this belief is the continuous adoption of the technology.Mainstream music artists such as Kings of Leon and Steve Aoki, for example, recently joined the NFT space.
The NFT boom of Q1 2021 was characterized by a few individual big sales. In the aftermath, the NFT market has evolved beyond one that is simply characterized by significant isolated sales. These isolated sales attracted significant attention, bringing in smaller participants who account for steady sales with lower volumes. This is a trend that is undeniably positive and will allow for a healthier and more mature market going forward.
The observation that the current trend involves smaller participants joining the NFT market does not negate the presence of some bigger players. Currently, an NFT sale is unfolding that has the potential of delivering similar numbers to what the market experienced in the famous Q1 2021 period. In this sale, the source code for the World Wide Web is for sale at Sotheby’s as an NFT with bids starting at just $1,000.
The World Wide Web source code will be packaged in the form of an NFT that is digitally signed on the Ethereum blockchain. It will also include the source code, an animated visualization, a letter written by the creator Berners-Lee, and a digital poster of the full code from the original files.
Foundation for vibrant NFT marketplace put in place
NFTs brought a new dimension to the cryptocurrency industry. Artists and creators of digital products are finding relevance for their works in more innovative ways by selling them in the form of NFTs.
Music, games, rare arts, and other forms of digital collectibles, among other products are critical components of the market underpinning NFTs. This is a market that is believed by many to still be in its formative stages and Q1 2021 may only be a testrun of of what is yet to come.
Depending on what the emerging trend delivers, we may or may not experience a similar explosion to Q1 2021 in the near-term future. However, based on the innovations in the NFT market and the entry of new players, the backbone for a vibrant NFT ecosystem is certainly being put in place.