The buzz about the NFT market decline had started long before the current crypto market crash. Some claim it’s far from death, with sales surpassing $42 billion. Others point to a serious drop compared to 2021 growth and ponder its chances of surviving in the bear market. OneArt gathers different opinions to help you draw your own conclusions.
📉 Decline or flatlining?
Last month, the sales plummeted to $1 billion from a $12.6bn peak in January. Given the crypto market situation, experts expect a pullout “in terms of the collections and types of NFTs that reach prominence,” Chainalysis economist Ethan McMahon explains.
The WSJ wonders if the market collapses. The average daily sale volume at the end of April dipped 92%, and the number of active wallets decreased by 88% compared to November. Doggy #4292 by Snoop Dogg was purchased for $32,000 in April, and at the time of writing the bids range from about $27 to nearly $1,253.
Another evidence of the NFT market losing steam is excess supply. As of April 2022, only 1.8 million people bought 9.2 million non-fungible tokens, which makes about five NFTs per buyer. While the number of buyers almost halved. The ratio of demand and scarcity is clearly not in favor of NFTs.
Small projects suffer the most from the market situation, while blue-chips perform way better and have more chances to stay afloat.
However, in May, the BAYC floor price dropped 38% compared to the end of April, decreasing from 150 ETH to 93 ETH. But despite this drop, top collections remain the most traded. It’s a sign of “a consolidation period,” DappRadar argues.
📈 Shift to a more sustainable market
It’s not all that bad, the other party thinks. Or even quite the opposite:
The current situation is rather leveling off than declining. The flatlining came to replace the 2021 whopping sales rush, which is more likely to indicate a steadily increasing stability of the NFT industry.
An NFT creator and collector Jason Bailey says “a pullback could be helpful for the longer-term health of the market.” Marcus Fox, the global managing director of 20th/21st-century art at Christie’s, agrees that NFTs are getting more awareness and familiarity that are “the building blocks of a sustainable market.”
So does Cristian Nyari, head of advertising strategy & partnerships at DAZN Group:
A more recent State of Web3 report by Chainalysis claims NFT activity has been growing since last year, albeit not consistently.
As of the beginning of May 2022, more than $37 billion have been sent to the marketplaces. It’s pretty close to last year’s $40 billion.
And even the latest data on buyers’ and sellers’ activity look much more optimistic. The decrease in the numbers doesn’t seem so dramatic.
Another point for the optimists — major market players betting on non-fungible tokens. For example, the Coinbase exchange, the largest in the U.S. by volume, has launched its beta NFT marketplace.
As per Nansen’s report, NFTs continue to outperform the crypto market YTD, “with the YTD return for NFT-500 (ETH) at 49.9% and NFT-500 (USD) at 37.7%.”
The truth is out there
Seems it’s all about who you listen to and how the results are measured. DappRadar emphasizes the importance of analyzing the marketplace volume in “native tokens.” For instance, in May, OpenSea generated 950,000 ETH in trading volume — ⬇️6.5% ETH compared to April and ⬇️ 25% if you measure in $.
While some projects or specific NFTs lose millions, the industry activity is still robust.
The real value lies in utility and community
While NFTs are the Wild West of the crypto space, we can’t predict the market future with great certainty. One thing many experts agree on is the underlying technology utility. It provides new opportunities for
- Medicine
- Education
- Voting
- Media
- Social media
- Film industry
- Fighting bureaucracy, and more.
And most importantly, strong interwoven communities are built around NFTs. Creators not only express themselves and share their artworks but also create a sense of loyalty. The NFT space becomes a space to share ideas, communicate, and collaborate.
NFTs will hardly repeat the 2021 meteoric success, but we’re likely to see a more sustainable and mature market in the near future.
