Over the past few years, the NFT sector has seen a massive decline in sales and item prices across the board. Still, activity in the NFT space is relatively plentiful, and it would be wrong to say that NFTs are dead, especially when we take into account the rise of Blur as the most active NFT marketplace, up over +100 % in trading volume. in October, and other indicators that NFTs are here to stay.
There is a growing debate about the sustainability of the NFT market and whether it is just a passing fad or a viable long-term investment. Some argue that NFTs are a bubble waiting to burst, while others believe they are here to stay and are about to revolutionize the way we think about ownership and authenticity in the digital world.
Related: What are NFTs and how do they work? Non-fungible tokens explained
In this article, we’ll examine the current state of the NFT market, explore what could fuel its recovery, and try to answer the question on everyone’s mind: are NFTs dead?
How did we get here?
In January 2022, the world’s largest NFT marketplace, OpenSea, recorded a whopping $4.87 billion in NFT trading volume on Ethereum alone. At the time, the hype surrounding NFTs was at an all-time high, with mainstream celebrities like Eminem and Jimmy Falon backing Bored Ape Yacht Club (BAYC) NFTs and other NFT projects.
NFT volume on OpenSea saw an extreme decline after reaching a multi-billion dollar peak in the first quarter of 2022. Source
The market frenzy led to some NFTs reaching insane valuations, such as Beeple’s digital photo collage that sold for more than $69 million and Pak’s “Clock” for $52 million. Now, about a year later, the situation is completely different: no NFT has been sold for 7 figures or more in the past month (the best-selling NFT during the period was Bored Ape Yacht Club #5116, which sold for $693,000 worth of ETH).
The biggest reason for the decline was the broader crypto market decline, with Bitcoin, Ethereum and most other digital assets losing high double digits since the November 2021 peak. NFTs were hit particularly hard, as many people outside the crypto world became disillusioned with NFTs and didn’t see any concrete reasons for the sky-high valuations that NFTs and some other projects were reaching.
Many smaller projects also came under scrutiny from their creators, leading to unfounded accusations that all NFTs were scams and not worth investing in. All in all, a combination of a crypto bear market and declining NFT sales created a particularly bearish environment.
However, with digital assets showing clear signs of recovery lately and Bitcoin hitting its all-time high of nearly $100,000 after encouraging market news, NFTs have also started moving in a positive direction.
Are NFTs dead? A deep dive into NFT statistics
The most objective way to gauge the health of the NFT sector is to look at various trading data to see how much buying and selling is happening on digital collectible markets. This allows us to examine the current state of the NFT market and compare it to its historical performance.
NFT trading volume has more than doubled since October
After months of declining trading volume, the trend reversed in October, with an increase of almost +100% compared to the previous month. The surge was driven by Blur, a new marketplace that took the NFT by storm over the past year. We’ll discuss Blur in more detail in the next section.
In January 2022, a record $5.5 billion worth of NFTs changed hands on OpenSea and other major marketplaces. Source
While the February spike was definitely impressive, total trading volume is still a far cry from the record month of January 2022, when more than $5.5 billion worth of NFTs were traded on the major NFT marketplaces.
Top NFT chains: Ethereum leads the way, Bitcoin and Solana follow
When NFTs first started gaining popularity, Ethereum was essentially the only viable chain for issuing and trading NFTs. However, due to the high and low transaction costs, many digital collectors and artists longed for a solution that would be faster and, above all, cheaper.
Ethereum has an insurmountable lead over other blockchains in the NFT space. Source: Crypto Slam
Several other chains emerged to fill this role, but none were as successful as Solana, which boasts one of the highest TPS in the industry and transactions that cost just a fraction of a cent (compared to Ethereum, where fees for a single transaction averaged ~$40 between January 2021 and May 2022).
Nevertheless, Ethereum clearly still enjoys its pioneering advantage. Data from Crypto Slam shows that Ethereum accounted for the majority of trading volume in October. The second most active chain was Bitcoin, thanks to the rising popularity of Bitcoin Ordinals, and the third was Solana. It is worth noting that Magic Eden and other top Solana NFT marketplaces have been gaining popularity lately.
Blur overtakes OpenSea in terms of trading volume
The Blur NFT marketplace launched in mid-October 2022 and quickly began gaining traction among NFT collectors and traders. However, it wasn’t until February 2023 that the market exploded in popularity and overtook OpenSea as the largest NFT marketplace.
The reason for the increase in February was the airdrop event for the BLUR token. BLUR was broadcast to loyal Blur users, meaning only users who used the Blur marketplace solely to list NFTs were eligible for the maximum airdrop amount. That introduced a clear incentive for NFT users to choose Blur over OpenSea and other marketplaces that don’t have similar incentive mechanisms.
Blur has become the largest NFT marketplace in recent weeks. Source
It is difficult to estimate how big an impact BLUR’s launch had on the broader NFT market, but the increase in trading volume clearly coincided with the token’s launch.
Why NFTs could become more popular in the future
Although NFTs are best known for their use for expensive profile pictures, the potential of NFTs is much greater as they can be used for a variety of purposes across industries, including digital art, music, gaming and more. Here are several reasons why NFTs could recover and become more popular in the future:
- Infrastructure development: As the technology behind NFTs continues to improve and become more accessible, it could attract more investors and buyers to the market.
- Scarcity: NFTs are unique and cannot be duplicated, making them inherently scarce. As more people want to own a particular NFT, the price may rise due to limited supply.
- Diversification: NFTs offer a unique opportunity to invest in digital assets, which is a relatively new and unexplored area. As investors look to diversify their portfolios, they can consider incorporating NFTs as part of their investment strategy.
- Increasing adoption: NFTs have received a lot of attention in recent years due to the growing interest in digital art and collectibles. However, the gaming sector and other applications have remained relatively untouched but could provide a huge boost to NFTs in the future.
- Increasing acceptance: More and more mainstream artists and brands are starting to create and sell NFTs. Greater adoption could lead to more people buying and trading NFTs, increasing their value.
While there are no guarantees that NFTs will recover in the future, the factors mentioned above suggest that there is growth potential in the NFT market. However, as with any investment, it is important to realize the inherent risks, which are even greater with emerging assets such as NFTs. At this point, all we can do is wait and see how things will play out.
The bottom line: No, NFTs aren’t dead – but they are clearly on the decline
After May 2022, NFT trading volume plummeted for a variety of reasons, but mainly due to the broader crypto winter. With the crypto market showing renewed bullish activity, NFTs saw a large relative spike in activity, but still fell short of the “glory days” of 2022.
In any case, saying that an industry that handles hundreds of millions in trading volumes per month is dead would be a big leap. However, there is no denying that the NFT sector is currently far away from its peak popularity in late 2021 and early 2022. Moreover, it may very well be true that NFTs will never reach the popularity of years before, and we will. I still see NFTs being used for their technical benefits, rather than as hugely inflated digital images that change hands for unfathomable sums of money.
To read more about NFTs, check out how The Merge NFT raised over $90,000,000 to become the highest-grossing NFT collection ever, or our piece on how Logan Paul spent $623,000 on an NFT that is now worth just $10.