Non-fungible tokens (NFTs) burst onto the scene in 2017 with the introduction of CryptoKittes, but the market has come a long way since breeding digital casts. Today, the term NFTs encompass a variety of collections, including art, metaverse tokens, and gaming collectibles, among others.
As the concept gained traction, demand for digital assets increased significantly, and by 2021, NFTs were regarded as one of the most important sectors in the crypto industry. The market capitalisation of NFTs even surpassed $40 billion in the same year.
However, a weak crypto market in 2022 harmed demand for NFTs, causing prices to fall by the second half of the year. To make matters worse, sales appeared to be drying up, leading to a mass exodus of buyers and sellers from the market.
Nonetheless, a lacklustre market did not dissuade several high-profile brands and businesses, including Starbucks, Louis Vuitton and Disney, from venturing into the NFT market. Meanwhile, celebrities such as Snoop Dogg and Paris Hilton made news after launching their own NFT collections.
Despite such developments, the overall NFT market’s performance remained muted last year. But has the situation changed in 2023 now that the cryptocurrency market shows signs of a broader recovery?
The present NFT market scenario
During the first two months of 2023, NFT sales were beginning to see a comeback. In January, the value of NFT sales touched nearly $1 billion according to cryptoslam.io, rising by over 40 percent compared to December 2022. Next month, NFT sales touched nearly $2 billion. A DappRadar report mentioned that trading volumes climbed to $4.7 billion in the first quarter of 2023, an increase of 137 percent over the previous quarter.
Additionally, Q1 2023 had a total of 19.4 million NFT sales, up by 8.5 percent from the last quarter of 2022. Ethereum remained the leading blockchain in the NFT market by volume, accounting for nearly 90 percent of the market share in March. The Solana blockchain came in second, followed by Polygon.
Separately, CryptoPunks was the most traded NFT collection on Ethereum. The trading volume of CryptoPunks touched $241 million in March, an increase of 1,214 percent from the previous month.
However, monthly trading volumes did dip by 15.6 percent in March to $1.7 billion. During the month, sales also declined by 4.63 percent to 2.7 million. Notably, March is the only month during the first quarter in which Bitcoin’s price remained flat.
But even though Bitcoin’s price did make some headway in April, growth in the NFT market remained muted during the month. In the last 30 days, NFT trading volumes have dropped by 37 percent to $1.28 billion from $2.08 billion.
Furthermore, the latest report from NFTGo shows that on April 26, there were 8,641 sellers and 7,907 buyers in the NFT market. This data is troubling since a greater number of sellers indicates that there is more supply than demand. This phenomenon may cause several NFT owners to lower their pricing, resulting in a decline in the overall value of the space.
Despite the headwinds and weak figures in March, DappRadar gave a positive reflection of the NFT market’s performance in Q1. The report stated ‘Overall, 2023 has started on a very bullish note for the NFT market’. It also mentioned that Ethereum’s dominance and the growing popularity of Polygon were the key highlights of the space.
Conclusion
The NFT market is witnessing a recovery in 2023 so far, despite dwindling figures in March and April. The recovery seems to be consistent with gains made by Bitcoin and Ethereum since the start of the year. Needless to say, the broader crypto market will continue to have an effect on NFTs. At present, it is unclear if the weak March and April data indicate a changing landscape or are simply aberrations. The second quarter of 2023 will provide greater clarity on where NFTs will end up by the end of 2023.
