NFT sales fell for the sixth consecutive month despite tailwinds

Sales of non-fungible tokens (NFTs) in October fell for the sixth consecutive month, failing to break $500 million in sales for the first time since July 2021, according to NFT aggregation website CryptoSlam.

Sales only reached $460 million for the month, representing a roughly 90% decline from the record $4.7 billion in sales in January 2022, as the market continues to be rocked by the concurrent decline in the broader crypto market.

Yehudah Petscher, NFT Relationship Strategist for CryptoSlam, told Discard in an interview the prolonged decline is due in part to market uncertainty surrounding the nascent asset class as it experiences its first significant bear market.

“Buyers and investors are still trying to figure out two things – where is the word and what are these long-term speculators really valuing?” he said. “Is that the tool? Are there rewards? However, what we are learning is that only in rare cases is it only the JPEG that they value. The market is proving that only a few of these JPEG-only projects will actually survive.”

Considered a crucial component of the resurgent Internet of Web3 – where gaming, social media and financial services are run through decentralized applications controlled by users’ wallets – a lagging NFT market could hamper the adoption of this burgeoning field.

Petscher told Discard that many projects within the area take the downtime that the bear market provides to consolidate around building and developing these projects further.

Of course, the NFT market does not operate in a vacuum. Hong Qi Yu, CEO of cryptocurrency Tokenize Xchange in Singapore which operates NFT marketplace Elemint, told Discard via email that the same conditions affecting the broader crypto market also apply to the NFT market, adding to the downward pressure.

“The current macroeconomic environment, where the US Federal Reserve continues to raise interest rates and causes most central banks to follow suit, leads to a reduced risk appetite of the NFT investor,” Hong said. “However, we believe that this will bottom out when the situation stabilizes again.”

The Fed raised interest rates from near zero in March to today’s 3.25% as inflation hit a near 40-year high of 8.2% in September, and has indicated it will continue this policy until inflation returns to a target range of 2% . It is expected to raise interest rates by another 75 basis points at the meeting of the Federal Open Markets Committee this week.

Despite the continued decline, there were also many positive developments for the market this month.

The giant social media platform Reddit, which boasts approximately 430 million active monthly users in 2020, saw a flurry of activity around its polygon-based NFTs at the end of the month, when it recorded US$2.6 million in sales on October 25 alone . reached USD 9.2 million in sales in the last 30 days, according to CryptoSlam.

Reddit’s integration with NFT launched in July and allows personalized avatars based on the company logo to decorate users’ personal pages. However, this recent increase can be attributed to a Halloween-focused “spooky season” collection, which drove most of those sales, and was beaten only by the Bored Ape Yacht Club (BAYC) collection in sales on those days.

In October, NFT marketplaces of all sizes also began making payment of royalty fees optional – something that has long been seen as central to the industry.

“It has actually been a fairly enlightened policy during the current NFT downturn and was done to counter the bear market and stimulate the establishment of more NFT related activities and motivate NFT investors to get out and buy and spend on NFT,” Hong said.

The leading Solana-based marketplace, Magic Eden, found it was losing market share to smaller competitors and made the move in mid-October, meaning the entire Solana ecosystem now pays no royalty fees by default.

Ethereum marketplace LooksRare quickly followed suit; however, they did make the concession to offer creators a percentage of the platform fees it charges users to shop on the network.

Petscher took a different view, describing the trend as a “race to the bottom”, and told Discard it at least sparked debate about the typical business model in the industry.

“How do we still make sure that the projects we love and the artists we love are still able to make a living?” he said. “If it’s not with royalties, which I would suggest it shouldn’t be based on royalties, they should probably have a sustainable business model.”

“Maybe a different conversation for artists as well,” he added. “But again, it’s up to all of us to come up with the right solution to make them monetize so they can continue to give us the things we want, which is just more NFTs and more access and more of these funny things.”

US investors were also given additional guidance in late October by the Internal Revenue Service which said NFTs would be taxed just like any other digital asset, such as cryptocurrencies or stablecoins. While Petscher said he was obviously not a big fan of paying taxes, he said the clarity was certainly welcome in the room.

In a last-minute addition to October’s sales figures, a compilation by Justin Roiland, co-creator of popular comics Rick and Mortycalled Art Gobblers released on October 31, has already amassed $31.1 million in sales, placing it just behind the leading collection BAYC for the month.

Petscher said the excitement around collections like Art Gobblers and Reddit NFTs shows there’s still life in the market despite the downturn, and he wouldn’t be surprised if any of those collections sparked a bigger market rally.

But it’s still wishful thinking at this stage, he said.

“My gut feeling is that we’re still years away from a true turnaround, which we saw earlier this year.”