What remains in the NFT market now that the dust has settled?

by · October 20, 2022

Over the past two years, non-fungible tokens (NFTs) have emerged as one of the most active and noticeable aspects of Web3.

The data stored on blockchains of NFTs can be linked to files that include various forms of media, such as photographs, videos and audio. In certain cases, it may even be related to physical objects. The owner of an NFT will often have ownership rights to the data, material or object associated with the token, and these tokens are usually bought and traded on specialized markets. The rise of NFTs was meteoric in 2021, but it hasn’t been very steady since then, and it seems to have dropped sharply in 2022.

Why NFTs Exploded in Popularity in 2021

In 2021, two of the most active markets for NFTs were collectible art projects and the video game industry. NFTs have ushered in a new era of video gaming, resulting in the proliferation of new types of games, such as blockchain-based games to earn money that give players in-game advantages. Users now have the ability to own in-game assets for the first time and potentially profit from such assets by trading them on NFT platforms such as OpenSea.

Axie Infinity, a game that included both NFTs and its own native cryptocurrency, became the most popular crypto game overall. Axie’s NFT market reached a milestone of $1 billion in total trading volume. In addition, gaming accounted for two-thirds of blockchain gaming NFT transactions in 2021, according to a report covered by Cointelegraph in March of this year.

The gaming industry can help bring NFTs into the mainstream due to their immense popularity. Pavel Bains, executive producer of Mixmob – a card strategy racing game – told Cointelegraph:

“NFTs in cryptogaming are a huge tool, probably one of the top three drivers of mainstream cryptographic adoption. Right now, the biggest roadblock we’re facing is that the games aren’t very fun to play. Some people will say, ‘Oh, the onboarding experience is bad… Using a crypto wallet is not ideal. You have to abstract it away. I don’t believe that. Kids will go through pain to get what they want if it’s fun.”

Fear of missing out also seemed to play a big role, with the huge success of photo-for-evidence gatherings such as the Bored Ape Yacht Club (BAYC) rising from a new price of $300 to up to $3.4 million for a rare golden monkey.

Whatever it is, there are usually two types of adopters: those who see the potential in a trend and are willing to stick with it, and those who join because everyone else is. NFTs are no different.

How NFTs Have Fared in 2022

NFT sales remained quite strong in the first half of 2022, with crypto users spending $2.7 billion minting NFTs during this period. But despite a strong start to the year, there have been some negative aspects within the NFT area.

Earlier this year, floor prices for BAYC fell below $100,000, only to recover, with the cheapest Bored Ape recently selling for 73 Ether (ETH) ($125,000) on OpenSea.

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This year also saw users lose their Bored Apes due to user error. “Fat finger” errors have resulted in hundreds of thousands worth of Bored Apes being sold for far less. For example, Ape #835 sold for 115 Dai on March 28th, while Ape #6462 sold for 200 USD Coin (USDC) on May 15th.

In September, daily NFT trading volume on OpenSea was down nearly 99% from its May 1 peak of $405.75 million, with a daily volume of $10.29 million at press time. In terms of individual pools, BAYC currently has a daily trading volume of just $400,000, according to DappRadar. According to the decentralized application explorer, CryptoPunks has no trading volume as of 07:20 UTC on October 3rd.

Due to current market conditions, one can expect to see fluctuations in the value of NFT projects, according to experts. Yaroslav Shakula, CEO of Yard Hub – a framework for NFT, Web3 and blockchain entrepreneurship ideas – told Cointelegraph:

“NFTs have certainly been affected by the bear market, but in many cases less severely than classic crypto and altcoins. What will happen next depends on the global political and macroeconomic situation. All technology stocks and risky assets are now falling against the US dollar, so in the short and medium term, fluctuations in NFT prices can also be expected.”

Despite these low volumes, NFTs continue to enjoy significant visibility.

Many people may have noticed a dramatic increase in the amount of people’s profile pictures on Instagram and Twitter that include a monkey, bear or other NFT image.

In January 2022, Twitter announced that users will officially be able to use NFTs as profile pictures via Twitter Blue. The premium, subscription-based version of Twitter allows users to connect to their wallet and post a hexagon-shaped profile picture when an NFT is connected. Meta quickly followed Twitter’s lead and implemented a similar feature for Instagram and Facebook.

Celebrities continue to be involved in the NFT space, with Snoop Dogg recently collaborating with Mobland, a mafia-themed metaverse, to create NFTs for digital weed farms. The weed farms were developed as part of NFT 3.0, the third generation of NFTs.

The future of NFTs

Not only do some industry insiders feel that the NFT market will continue to exist, but they also expect it to continue to expand and play an increasingly crucial role in the digital economy. According to a report covered by Cointelegraph, the NFT market could be worth $231 billion by 2030. This is due to continued adoption in video games, music, art and digital collectibles.

Shakula is optimistic about NFTs in the long term, telling Cointelegraph: “In the long term, NFTs definitely look good – I’m sure they have a great future. This technology opens up a lot of new opportunities, even for classic businesses and regular users. They can be used to symbolize assets and give them to employees as benefits.”

Experts also believe that our lives will become more virtual in the coming years. It is possible that in the near future people will be able to perform their daily activities in a virtual space using virtual assets. Essentially, this will represent the creation of a metaverse where everything is transformed into an NFT token. Although it is unknown how this will co-exist with our physical lives in the “real world”, the revolution is already well on its way to being realized.

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Some experts believe that NFTs will soon reach mainstream status. Jack Vinijtrongjit, CEO of AAG – a Web3 development firm – told Cointelegraph, “NFTs are evolving from just being a collectible and speculative tool to real-world use cases, such as identity and customer relationship management. We can already see companies like Starbucks using it as a replacement for the membership card and universities issuing NFTs for a diploma. I think we’re about to see NFTs move from niche to mainstream as a result.”

The video game industry’s reaction to the introduction of NFTs has been the subject of much conjecture. Although some businesses are currently providing digital assets as part of blockchain games such as Ember Sword, the widespread use of this technology has yet to occur in the gaming community, leaving many specialists wondering how or even if they will take off in the mainstream gaming industry.