Are NFTs Dead?
A look into the NFT market
Since early 2022, I’ve heard people saying that NFTs are dead. Many of those caught in the hype of 2021 have now retreated. Is it true? Have NFTs really come and gone so soon?
In this article we’re going to look at the state of NFTs by exploring real data and analytics, macro markets, and looking at future growth of this space.
What’s the data saying?
Interestingly enough, it’s commonly stated that the NFT boom took place in 2021, tapered off towards the start of 2022 and subsequently died after that. I’ve even insinuated this in my previous articles. This narrative has rattled the conviction of NFT bulls and token holders who have a lot of money invested in these assets. Additionally, it’s fueled the doubt in NFT skeptics even further.
I decided to investigate the data to see what’s really happening in the market and share the real state of NFTs today.
The best place to start will be to have a look at the ‘NFT Market Overview’ dashboard from Dune Analytics. After seeing the numbers, it became clear that this narrative creates a misleading picture of what is actually happening in the NFT market.
Trading Volume in USD
Let’s begin by looking at the total market for NFTs, based on US Dollar value, since inception in 2017.
Let’s look a little closer at the past 24 months.
What does this tell us about the NFT market? Well, the NFT boom did, in fact start in the summer of 2021, around July, and it looks like it peaked at all-time highs (ATH) in early September. The market then tapered off until January 2022, where it started soaring all month long, until it hit ATHs of $6 billion in trading volume in the last week of the month! That’s 3x the ATHs of the 2021 NFT summer “boom.”
Bear in mind, at this point, the world was still flush with money since central banks had been printing money left and right, and the pain of inflation hadn’t yet kicked in.
What I find remarkable is what follows. Naturally, the market couldn’t sustain January’s peak and tapered off again in February. However, for about 3 months following the Russian invasion of Ukraine, trading volume remained, on average, above the ATHs of 2021. Looking at the graph above, the trend was actually upwards!
Once the end of May came around, however, the market conditions were too dire for prices to hold. The war in Ukraine was still raging, inflation worries increasing, and a fuel crisis was starting to emerge in Europe.
Guaranteeing that you can power your home and put food on the table is a slightly bigger priority than trading JPEGs, so naturally, prices slumped. But that’s not the full picture.
Buyers and Sellers
Prices fluctuate. That’s not unique to NFTs. We see it in all markets, and macro conditions have a tight grip on prices. 2022 has been a tough year for all asset classes, and as mentioned above, nothing trumps the certainty of being able to power your home and feed your family.
What is fascinating though is to see that most NFT buyers and sellers have remained in the market. It’s only prices that have taken a beating, indicating that the interest in the space remains high and the underlying technology is sound. People just don’t have as much money to spend on them right now. This speaks volumes to the future of NFTs and what we can expect from the years to come.
We can further see this by viewing a graph on total transactions. Looking at the data below, we see that the number of transactions on a weekly basis remains the same as the “boom” of 2021, which is a really positive indicator. Similar to cryptocurrencies, and any other asset class for that matter, the NFT market will move in cycles, and each cycle will see a higher and higher low bottom.
I’ll admit that asset cycles in web3 tend to be much more violent than any other asset class. But before you whip out your skepticism, remember that this type of fluctuation isn’t unique to web3. Some of you will notice that the NFT market graphs look eerily similar to the NASDAQ in 2000. The Dotcom market cycle behaved very similarly. And how significant are web2 technologies to modern life today?
How can creator teams grow and sustain NFT projects?
There are always going to be teams that try to “pump and dump” their new projects. This kind of behavior long precedes the age of crypto and NFTs.
NFTs haven’t been around for long, and the allure of a ‘quick buck’ is still fresh in people’s minds. I think we’ll still see many violent peaks and bottoms in the coming years where people trade on their emotions and economic FOMO. That being said, I believe the market as a whole will continue to grow and sustain. But there are a few critical things that the new wave of creator teams needs to focus on if we want to see the NFT market grow sustainably.
- Prioritize the token holder
- Underpromise, overdeliver
- Nurture the community
1. Prioritize the token holder
NFTs are not about the creator, the company, or the brand. They are about the token holders. The advent of NFTs has brought us into a new age of our digital societies where the customer/audience/fan can take part in the creators journey and ecosystem in an immersive way. Appreciating that someone has paid their hard earned money for an NFT is a responsibility that shouldn’t be taken lightly. Creator teams have an opportunity to deliver tremendous amounts of value, share rewards, and deliver exclusive perks frequently. And guess what? Token holders will notice.
For the NFT market to grow, creative teams need to make sure the interest of the token holder is their north star, trumping their own self-interests. The demographic purchasing their NFTs will not be the elite group of BAYC holders. It’s going to be regular people with regular jobs. They will appreciate the added effort, and projects will thrive because of it.
2. Underpromise, overdeliver
Since acquiring a range of different NFTs and joining their communities, I’ve noticed a common trend in many projects. Due to the recent hype in this space, many creator teams will overpromise what they can deliver to their holders and fail to follow through. This can have severe consequences. It only takes one really bad experience to lose the token holder’s trust for good and send the project to settle in an early grave.
The communities I’ve joined where the creator team are super honest and transparent with what they can deliver (underpromising) while overdelivering in the end, are amazing. It makes you feel great as a token holder and makes you want to promote the brand to others while also remaining a long-term holder. This is an opportunity for teams to capitalize on the failure of others to create a great project while simultaneously benefiting the future prospects of the NFT market.
3. Nurture the community
For those who are launching an NFT project, whether as a creator, a business, a brand, or a charity, you need to understand the importance of community. The meaning of the term “community” has been lost in web2. People now refer to their social media followers as their community.
And honestly, thinking of your Instagram followers as a community is just plain lazy.
A real community is a group of individuals who engage in authentic interaction over shared values, interests, and goals. People who come together and make things happen, who build new friendships, and whose lives are better off for it.
If you’re building an NFT project, it’s your job to build and nurture such a community. It’s an investment of time and money, but one that is critical to budget as a cost of running an NFT project. Without it, the project will almost certainly fail, and it will have a negative impact on the growth of the market.
There are of course many nuances to making sure an NFT project is successful. However, the most important aspect is always going to be the token holder and the surrounding community. If creator teams prioritize these, I guarantee that things will work out better than for 99% of the teams that don’t. Communities provide tremendous support to projects they know are working hard to create a great experience and deliver value.
Conclusion
NFTs are far from dead. They are only just getting started. Although we have limited data due to the short time horizon, the data we do have is incredibly positive. Particularly given the current macro market conditions. Very few NFT market participants have left the space, and trading volume remains higher than the 2021 NFT summer boom. Once the macro conditions improve, NFTs will be back in vogue.
However, to ensure the NFT market continues to thrive and grow over time, creators have a responsibility to leverage the benefits this technology offers to create a great experience for the holders. It’s all about the token holder’s experience and the health of the community. The projects that make this their number one priority will be the ones that are still around in the years to come.
If you’re considering launching an NFT project, at a minimum, you need to own a few different NFTs and have engaged with the community of token holders. You need to understand what makes up a good community and what doesn’t. You need to experience the upside and the flaws of the token you’re holding. If you don’t, I think you’ll struggle to find any long-term success.
Want to learn how to mint an NFT?
Check out this article where I guide you through minting your own NFT on OpenSea.
