It seems like the multi-million-dollar NFT industry is on shaky ground. While sales leapfrogged from USD 94.9 million to USD 24.9 billion in 2021, growth has been inconsistent since then, and the trend is showing signs of reversal.
According to the blockchain research firm, Chainalysis, NFT sales have occurred in small bursts after the summer of 2021. Since then, only two significant events have stood out — the Mutant Ape Yacht Club (MAYC) launch in August 2021 and the LooksRare NFT marketplace launch in January 2022.
Between mid-February 2022 and mid-March 2022, NFT activity significantly plummeted. Weekly NFT sales cliff-jumped from $3.9 billion to $964 million. In fact, the weekly activity was at its lowest since August 2021. Nonetheless, it showed signs of recovery through April and matched last year’s sales numbers for the month.
Chainalysis also found that increased retail investments have kept the numbers up. Data from the blockchain research firm shows that most NFT sales have been less than $10,000 in value. This suggests that more retail investors have dipped their toes into NFT waters.
Although the number of NFT collectors is low, their NFT purchases command the vast majority of the sales proceeds as they spend between USD 10,000 and USD 100,000 per transaction. Until May 1, 2022, collectors had pumped USD 37 billion into NFT marketplaces, which is close to the USD 40 billion they spent last year.
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However, NFT collectors have not been so active since September 2021, which means retail investors have been pulling the weight through the turmoil.
On the other hand, Institutional NFT investors have not been able to sustain growth, Chainalysis found. While they made up 73 percent of all NFT activity in October 2021, the same has currently declined to 33 percent.
Data sourced from analysis firm NonFungible shows that NFT trades in Q1 of 2022 nosedived by almost 50 percent compared to Q4 of 2021. This is one of the hints that the NFT market was fuelled more by hype and less by its use or intrinsic value.
Another report from the monitoring firm, CryptoSlam, showed a sudden decline in sales, with only USD 31 million being spent on art and collectibles until May 15. This is the lowest figure all year.
“It could be a general decrease in hype, it could be fear of scams after so many high-profile ones, or it could be people tightening their belts,” said crypto sceptic Molly White to the AFP in a conversation about the market downfall.
One of the most glaring indicators of the NFT market struggle was the re-auctioning attempt of the world’s first tweet by Twitter founder Jack Dorsey. The NFT that fetched $2.9 million in 2021 only attracted a maximum bid of USD 20,000 in 2022. Eventually, the auction had to be revoked.
However, the overall health of the industry has mixed reviews. “While specific NFTs have lost millions of dollars of value, the health of the industry depends on who you ask,” wrote the Guardian. It’s true. If you look at the numbers, you wouldn’t be as appalled as everybody else. Let’s take a look.
Data from CryptoSlam shows that the total NFT sales since the start of 2022 stand at $16.2 billion. In 2021, NFT sales amounted to just $1.5 billion during the same period. In May 2021, sales proceeds of $439.2 million were recorded. With one week to go, May 2022 has already witnessed NFT sales worth $2.4 billion.
“The ‘blue chip’ names like Bored Ape Yacht Club have more price stability than new entrants that may get hot and then fizzle out. I would only caveat this by saying that this isn’t new in this space: to date, a select group of popular collections have been the ones to receive the vast majority of activity and, generally speaking, most collections never take off,” said Ethan McMahon, an economist at Chainalysis to the Guardian, earlier this month.
