NFTs roar back to life with $1bn sales in January, up 34%
By Tom Rodgers, Head of Research, ETC Group
One of the best ways to track speculative interest in crypto markets is to look at its frothier elements including NFTs and DeFi.
NFT sales across the major blockchains advanced to almost $1bn in January 2023, an average 33.83% rise across the top 12 chains. Ethereum again led the way.
It’s worth noting that not every blockchain is designed to be a Layer 1 chain for transactions in Web3. On the Tik Tok-adopted ImmutableX, for example, users can only do three basic things: buy NFTs, sell NFTs and hold NFTs. Compare this to Ethereum, which can compute any type of arbitrary code and hold the state data of all the smart contracts being used on its platform at any time.
Panini, a more recent entrant to the market, is seeing decent returns from its investment into a Sawtooth Hyperledger-based blockchain, with the toy brand starting to make inroads into the largely crypto-native market in January. Just as with other market participants, Panini NFTs are packaged in the same way as physical trading cards, with NFTs minted and then randomly placed into packs or set up for auction on the Panini website.
Four of the top 10 are Ethereum-based chains, in line with that blockchain’s dominance of the NFT market. NFTs on Ethereum registered $758m in sales in the 30 days to 31 January 2023, with Solana taking second place with $151m.
Other associated statistics compiled during the month suggest that NFTs may not be the albatross around investor’s necks that mainstream media reports tend to suggest.
Trading volume is starting to recover and across January 2023 rebounded to a six-month high.
There will be some concerning elements to watch for Ethereum holders: including the rise of alternative Layer 1 blockchains. We heard in late January that Doodles, a popular NFT release, would move away from Ethereum to launch on the Flow blockchain.
The decentralised exchange Uniswap V3, which currently provides the second-largest amount of ETH burn on Ethereum, will launch on the BNB Chain after a community UNI tokenholders vote saw it reach an 80% threshold.
However: the definition of NFTs has now expanded far beyond their initial use case as digital art, into game items, digital identity and even digital collateral for loans. In a sector crying out for standardised reporting and data availability, portable and self-sovereign digital identity — a key portion of Web3 over Web2 — is starting to make its voice heard.
NFTs the Trojan Horse to 1 billion crypto users
ETC Group first predicted in Q3 2021 that Ethereum-based NFTs would be the ‘trojan horse’ to take crypto to its first billion users, and we are now more confident than ever that this will be the case.
Reddit’s avatar marketplace has brought 4 million new NFT addresses to the table, without once mentioning NFTs. Starbucks’ beta test of its Polygon-based Odyssey platform, released in limited early form on 8 December 2022, will allow users to earn NFTs that unlock additional features and customer benefits. These are called ‘journey stamps’, in Starbucks press material, and do not mention Polygon, Ethereum or NFTs. Instagram has been testing the waters for creators to sell NFTs directly.
Household names such as Nike have already profited heavily from introducing users to Web3 and NFTs: in August 2022 the sports apparel giant reported $185m in sales from NFTs, making it the highest earning NFT brand in the world at the time.
We would expect this trend to continue, as NFT markets are still immature and penetration remains in a fairly nascent state.
Amazon to enter NFTs?
A late-January report by Blockworks (citing five unnamed sources) injected an extra frisson of excitement into the mix. It suggested that Amazon, the world’s fifth largest company, was preparing to start using NFTs in gaming products. These would be focused on Amazon’s main consumer-facing platform, rather than its infrastructural backbone Amazon Web Services (AWS). AWS has officially supported Ethereum since March 2021 via the Amazon Managed Blockchain, and offers full node services for developers.
This retail-focused entry into NFTs is an entirely different infrastructure beast, however. It would open up the $1 trillion market cap company — the third-largest by revenue globally — and its estimated 300 million customers to blockchain-based assets.
Read the full January 2023 Digital Asset and Metaverse Review at ETC Group
Featuring Macro Signals, Regulatory Signals, On-Chain Signals, Digital Asset Equities and Into The Metaverse
