How did NFTs fare in 2022?

Non-fungible tokens, or NFTs, were all the rage in 2021, rising to astronomical heights alongside skyrocketing cryptocurrency prices. However, cryptocurrency prices fell off a cliff in 2022, throwing cold water on the NFT market. Prices have fluctuated dramatically, and trading volume has been far below what we saw in 2021.

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But exactly where does the NFT market stand now, and how does it shape up for 2023? Here are some insights into this still growing field.

NFT transaction volume in 2022

Overall, NFT transaction volume in 2022 decreased dramatically. From January 2022 to September 2022, NFT trading volume fell by 97%, from $17 billion in value to just $466 million. [5]

As of June 2022, the total number of daily sales was around 19,000, with a dollar value of just $13.8 million. From March to June 2022, the total NFT market value fell by 40%, while trading volume fell by 66% – right in line with falling cryptocurrency prices, especially Ethereum.

May 1, 2022 remained the highest value trading day in NFT history, when 118,577 NFTs were sold for a total value of $780.4 million. However, as the crypto market has continued to hang in a “crypto winter”, NFT prices and transactions have not shown any serious signs of recovery.

Top Dollar NFT Sales in 2022

Although the NFT market has dried up to some extent in 2022, there were still many notable high dollar sales. In fact, given the way the crypto market completely imploded under it, the NFT market actually held up pretty well, at least in terms of high dollar sales. Here were the top dollar NFT sales in 2022:

• XCOPY’s All Time High in the City, January 2022: 1630 ETH ($6.2 million at time of sale)
• CryptoPunk #5577, February 2022: 2501 ETH ($7.7 million at time of sale)
• CryptoPunk #5588, February 2022: 8000 ETH ($23.7 million at time of sale)
• Julian Assange and Pak’s Clock NFT, February 2022: 16,953 ETH ($52.7 million at time of sale)

On the plus side, it is notable that CryptoPunk #5588 was the highest priced CryptoPunk NFT ever sold, and it sold in 2022. However, the fact that there were no top-dollar sales of NFTs after February 2022 is a clear indication that the NFT market began to decline as the year progressed.

What awaits in 2023?

While there is no doubt that the NFT market has taken a serious hit in 2022, there are still some very positive analysts and industry insiders who see 2023 as much kinder to the market. This hope rests on the fact that NFTs are a crucial part of the digital economy, which looks set to expand even if it does not become the “parallel universe” that is as important to today’s market as some predict.

The theory behind this bullish outlook is that NFTs will continue to be adopted by video games, artwork, music and digital collectibles. If life does indeed become more virtual in the coming years — where consumers use virtual assets in the metaverse — NFTs may indeed have staying power. A report by Verified Market Research, for example, estimates that the market value of NFTs will jump to $231 billion by 2030.

However, prices will likely have to reverse course before hype returns to the sector. In November 2022, Google reported that searches for NFTs have fallen by 88% in less than a year, perhaps the best real-world indicator of how interest in the sector is waning.

The bottom line

NFTs have always been a speculative asset class and they still are. Regardless of whether or not price momentum returns to the sector, investors should brace themselves for volatility in NFT pricing for the foreseeable future.

The question investors must answer for themselves – in conjunction with a financial advisor – is whether the falling prices and trading volumes in 2022 are indicative of a washout bottom or just the beginning of the pain in the sector.

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