In 2020, the cryptocurrency industry greeted a new trend – decentralized finance (DeFi). Projects from this sector gave hundreds of X profits in a short amount of time. Many analysts are confident that the DeFi sector encouraged the growth of the entire market in the past year.
In 2021, DeFi was replaced by the non-fungible token (NFT) sector. While DeFi can modify interactions with banking institutions, the scope of NFT shows much broader opportunities (ownership, workflow, gaming, etc.).
The NFT market showed several dozen times growth at the beginning of the year, followed by a sharp correction. Many skeptics began to say that the bubble has deflated, and soon, this sector will be of no use to anyone. In this article, we will talk in detail about what is happening with this industry and analyze its prospects.
NFT Market in Figures
The NFT market has really boosted this year: at the end of last year, monthly sales did not exceed $10 million, and by the beginning of May, they already reached more than $325 million (Which is 3250% growth). The reason for such a large-scale growth was a bullish trend on the entire crypto market – in May, Bitcoin fixed it’s all-time high, and then altcoins followed.
At the same time, NFTs were still in high demand – unique assets were bought for millions and tens of millions of dollars. Here are the most significant NFT sales since the beginning of the year:
- In February and March, several “crypto-panks” were sold for $1.24 million, $1.5 million, $7.57 million, and $7.58 million. And in June, a “crypto-pank” was sold for a record $11.7 million.
- In March, auction house Sotheby’s sold the Beeple digital collage as NFT for $69 million.
- That same month, Twitter founder Jack Dorsey sold his first tweet`s NFT for $2.9 million and donated money to charity.
However, the entire crypto market began to fall in the second half of May. If, in the beginning, the monthly sales of NFT exceeded $325 million, then by June, they dropped below $60 million. The number and an average check of transactions and active wallets that bought or sold NFT decreased. The media started calling NFT a bubble that bursts, claiming the previous trading volumes would never repeat.
However, crypto market participants and enthusiasts took it calmly: after such explosive growth, it was evident that the decline would be just as sharp. Moreover, all the skeptics turned out wrong since the NFT market is alive, recovering, and is close to reaching its highs by fundamental indicators. So, The Block informs, on July 11, the weekly trading volume on the NFT market exceeded $209 million, which was a new all-time high for this sector. The last high came at the end of February and amounted to $197 million. In May, weekly trading volume decreased to $35 million – almost six times more than the lowest value.
Nonfungible service informs that the total number of weekly NFT sales is now near an all-time high despite a drop at the end of May. So, at the beginning of the year, the weekly amount of transactions reached 14,800, at the peak (at the beginning of March) – 48,600, at the local minimum (in May) – less than 13,000. And now, this figure already exceeds more than 35,000 deals for the week. Another thing worth noting is that since May, NFT sales have been slowly but steadily recovering without sharp ups and downs. That means that growth does not depend on hype but the steady organic development of the sector.
The NFT secondary market also peaked at 28,570 trades in early March, after which it slowly declined to 5,700 trades per week by mid-May. Then, in two and a half months of slow growth, it reached 15,000 – 19,000 transactions per week.
As you can see, a sector collapse is of no question. In the spring, the market experienced real explosive growth, after which it collapsed along with the entire crypto sector in May. But since then, it has been recovering slowly and, most importantly, without sharp jumps and is already close to it’s all-time high. However, this time there is no hype and increased media attention. This is the result of organic growth. Collectible tokens turned out to be the most resistant to correction. They accounted for 66% of total trading volume in the second quarter of this year, digital art for 14%, and in-game items for 7%.
New Boom is Coming
In August 2021, we witnessed another boom in the NFT market when famous people started issuing non-fungible tokens. For example, Till Lindemann, lead singer of the legendary group Rammstein, and Lionel Messi, one of the best football players in the world.
Along with this, the entire cryptocurrency market began recovering after a two-month correction in the second half of the summer. As a result, the sector of non-fungible tokens also started to increase in August 2021: trading volumes on the OpenSea NFT marketplace exceeded $828.6 million, although, in July, they only reached $284.2 million, and in June – $125.2 million.
Till Lindemann started selling his tokens on the Frame NFT platform. Now his fans may purchase five different types of Rammstein singer`s tokens. Each of these tokens has a different price. The most expensive one costs 100 thousand euros. This value includes not only the token itself but also a real meeting with the star.
One of the highly paid footballers, Lionel Messi, has also issued his own NFTs, called “The Messiverse”. It caused an explosive growth of Ethernity Chain tokens by more than 125% in a month.
Besides, Tom Brandi, The Weeknd lead singer, Sophia the robot, Kevin Smith, football legend Pele, Floyd Mayweather, and many other famous people issued their NFTs.
It seems like it won’t be very long before another boom starts in this market. Many experts believe that the NFT market will keep growing. Many investors are asking themselves if it is worth entering this market now? There is no right answer to this question since, along with growth, there are also many scams in this market. Unsuspecting users risk being cheated, so the NFT market, like any other, requires common sense. Be sure that you carry out your investments carefully and in compliance with money management, and remember that “hype” usually leads to overheating the market, and a correction anyay follows sooner or later.
New Directions for the NFT Market Development
Market participants admit that the hype is over but consider it more positive rather than a negative factor. As with other cryptocurrencies, the recent correction was predictable and even necessary for an industry that overheated too quickly. Million-dollar NFT record deals mean that these assets have attracted many crypto players just for the sake of speculative trading.
Brands are also interested in metauniverses. So, in July, The Walking Dead franchise appeared in The Sandbox. Brands also use NFT for PR and advertising. For example, in June, beer maker Stella Artois released 50 unique NFT horses for digital horse racing on the ZED RUN platform. The money from the sale went to support bars and restaurants in Europe, affected by the lockdown.
In the NFT market, there is also growing interest in virtual real estate in the metauniverses Decentraland and The Sandbox. In May, gaming giant Atari set up a virtual casino and gaming center at Decentraland. In June, investment company Republic Realm bought the digital district in Decentraland for $913,000. The company plans to turn it into a virtual shopping area. Sotheby’s has created a digital copy of its London office in-game.
On the basis of the foregoing, we can state that the NFT market is only at the very beginning of its path. To provide more sustainable growth, the NFT market should discover even more real use cases.
The explosive growth in early 2021 was all about collectible NFTs. Still, the scope of use of non-fungible tokens is much broader (document flow, digital real estate, gaming, intellectual property, etc.). So, most likely, we will witness a real boost in the NFT market in the future. Many experts agree that the NFT sector will not disappear anywhere and will only develop.