The global NFT market is recovering with more trading and new players
In 2021, at the height of the crypto euphoria, the NFT market was skyrocketing - the average price was huge, and waves of new collections and tokens were flooding the ecosystem.
After a bad 2022, catalysts for growth emerge and models become smarter and easier to use.
The topic in brief
- The Crypto Winter has wiped out a huge chunk of the value of all NFTs in circulation, but now things are changing.
- Companies such as McDonald's, Coca-Cola, and others have entered the sector for which 2023 is extremely important.
- China is planning its non-fungible token system, effectively allowing trading them.
In 2021, at the height of the crypto euphoria, the NFT market was skyrocketing - the average price was huge, and waves of new collections and tokens were flooding the ecosystem. In January 2022, the total value of deals was $17 billion. By November of that year, it had fallen to just $400 million, a collapse of more than 95%. The cryptocurrency market crash wiped out a huge chunk of the total value of all NFTs in circulation. In the last month, however, a reversal of the trend has been observed - the sector is reviving, new collections are being launched, more and more brands are creating their own NFTs. Even former US President Donald Trump and investment funds are entering the segment.
Now those who were not troubled by the declines are philosophical about what happened, taking it as a cleansing event. And as Shiva Rajaraman, vice president of OpenSea, the world's largest NFT marketplace, wrote on his Twitter profile: "Although the publicity was good for business it brought people to NFTs for the wrong reasons—to make a quick buck—and distracted from the utility of the technology.”
However, the crash in the crypto sector has not stopped global companies from flooding the market with NFTs in an attempt to cash in on their established brand, and perhaps in an attempt to change the space for the better... Crypto exchange Binance, for example, recently launched a collection of NFTs in collaboration with Cristiano Ronaldo and Warner Bros published an NFT version of The Lord of the Rings: The Fellowship of the Ring. This is, of course, a small drop in the ocean of brands like Nike, Adidas, Puma, Dolce & Gabbana, Gucci, McDonald's, Coca-Cola, The NBA, The NFL, and others already using NFTs for their brands and selling for hundreds of millions.
The trend is up for the entire month of December and the first half of January, with each week so far seeing at least 2x the trading volume of November. Now many expect a great first quarter for NFTs as there are many catalysts for it.
Some of the highly anticipated projects that are changing the sector are the token distribution of the new NFT market - Blur.io, 9GAG's Captainz mint, Yuga Labs' latest project, Azuki's first collection one-year party with prizes, but also the Chinese New Year. One of the biggest stories days before the New Year was the announcement that Dust Labs and their core DeGods collection would be moving from Solana to Ethereum.
Another catalyst is information in China Daily that China will launch its own NFT market for "digital collectibles" in January. Now, a government-backed platform will allow users to trade digital assets such as collectible copyrights and property rights. Until now, the sale of NFTs in China was prohibited. The new platform will run on an underlying blockchain called the China Cultural Protection Chain.
The blockchain that powers China's digital asset trading platform is described as China's "only trusted depository service platform for tradable digital assets". It will provide services such as digital asset registration, rights confirmation, deposit, monitoring, and copyright protection for institutions and individual users. The platform also partners with Digital Collection Home, China's first digital collection credit evaluation and aggregation platform in the Metaverse, developed by ZhongRong Global Holdings Co. This partnership will give users of the platform access to related data to the Metaverse and digital collections.
It also became clear that the investment giant Fidelity, which manages assets for over 4.5 trillion dollars has filed for three new trademarks in December 2022 that cover products and services offered on Metaverse. These include referral services for investment advice and financial planning in the metaverse, virtual real estate investing, crypto trading, and exchange services.
Are the bulls back in the NFT fold?
Many are asking themselves this question - is the bull market coming back? Data from IntoTheBlock and DuneAnalytics shows that there has indeed been an increase in NFT trading volume over the past month, but the growth is still not steady - the chart shows more of a zigzag pattern of peaks and troughs.
Daily trading volume at the beginning of December was $33 million, and in the week ending December 31st, that number was $47 million, which is about a 42% increase in the 30-day trading volume on Ethereum and Solana. However, zooming out and looking at the 7-day chart shows a more bullish move. Starting at $20 million on December 25th, there has been more than a 100% increase in daily volume over the past two weeks. This explains the renewed strength in the NFT market but does not necessarily mean that the NFT bull market is back in full swing.
According to IntoTheBlock, the number of new addresses buying NFTs is decreasing, which is also due to the higher base of comparison. As of Wednesday, January 18th, only about 6,000 new addresses were using NFTs, hitting a nearly two-year low. The last time this was the case was in February 2021, when irreplaceable tokens were still trying to establish themselves in the crypto market.
Increasingly creative ecosystems
As the state of the crypto market remains uncertain in the coming year, projects are adapting to work smarter in order to succeed. This involves turning their holders into a living advertisement and launching their NFT holdings. Many successful projects use intellectual property (IP) licensing agreements to create new revenue streams for owners and accelerate the growth of their brands.
Yuga Labs, the NFT startup behind the popular Bored Ape Yacht Club, has granted the IP rights to all its projects, including CryptoPunks and Meebits, to holders, allowing their NFT characters to be used to brand food trucks, TV shows, music bands, etc. Other projects like Moonbirds and Goblintown have adopted the CC0 license, which essentially puts the use of their characters into the public domain, even for commercial purposes.
The creators of NFT also look beyond the art and build entire worlds around their characters. In 2023, Yuga Labs shifted its focus to building The Otherside, a gamified metaverse initiative that allowed users to turn their NFTs into playable characters.
Given the pace at which the NFT market is moving, it is almost certain that new trends will emerge in 2023. The possibilities for using NFT will continue to expand and create new tools for experimentation and creative collaboration - just as 2021 was about advertising in the sector, and 2022 was about rethinking what web3 is all about.
Ripple wants a piece of the pie
In November, Ripple's CTO David Schwartz announced the start of a new NFT standard on the XRP mainnet, which was enabled by an amendment called XLS-20.
The onXRP NFT market, which is based on the XRP Ledger, has seen a total sales volume of over 7.3 million XRP, equivalent to about $2.45 million. David Schwartz suggested that the use of non-fungible tokens could go beyond the realm of digital art. The company's $250 million NFT fund recently backed projects that use NFTs in ticketing, music, and movies. Schwartz also stated that the implementation of the XLS-20 amendment, which enables the use of NFTs on the XRP mainnet, will make it easier for external projects to connect to Ripple's technology and benefit from low fees and a stable network.
Reddit NFT avatars
As a working and massive community, Reddit has invited NFT to its platform. Reddit's non-fungible tokens (NFTs), called "collectible avatars," have gained popularity since their release in the summer of 2021. These NFTs were minted on Polygon, and the vast majority of the initial distribution is free. Over 7 million Reddit NFTs have been minted so far, with more than 5.3 million unique holders. The success of Reddit's NFT launch is considered a significant achievement for the adoption of Polygon and the NFT industry as a whole. And this is making NFTs (though called by a different name) more and more popular.
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