Billion-Dollar NFT Market

In March, Beeple sold an NFT for a whopping $69 million at an auction organized by Christie’s. And in case you don’t know — Jack Dorsey, CEO of Twitter, sold his first tweet as an NFT later that month. Sounds funny? Well, that is if you call $2.9 million! Yep! It is clear that Non-fungible tokens (NFTs) are not only making headlines; they are making multi-million dollars for content creators.

In this article, we will look at the potential of NFT as well as possible pitfalls.

MARKET OVERVIEW

Photo credit: Antier Solutions

A Non Fungible Token is a blockchain-based, monetized record of unique, non-interchangeable data. It represents a digital asset. The unique thing about an NFT is that it can link to any form of digital asset, be it art, text, videos, photos, songs, or lines of code. Too, in a tokenized form, it can represent any digitally represented artefact. By that, we mean a physical asset that has been digitized.

No, Non-Fungible Tokens are not just another abstract asset. They present big business opportunities for digital business elites. This is because they make it possible for organizations to create new business models. And such organizations can also boost the value of their existing products and services, and explore new markets. Non Fungible Tokens also offer other ways to invest in and fund projects. Now, check what we are talking about in this list of top value NFT aside from Beeple’s art:

  • CryptoPunk #7523 was sold at Sotheby’s for $11.7M.
Photo credit: Larvalabs
  • CryptoPunk #3100 hauled in a whopping $7.58M. And it is the third most costly NFT to be sold.
Photo credit: Larvalabs
  • CryptoPunk #7804 went for $7.57M, making it the fourth most expensive NFT.
Photo credit: Larvalabs
  • Beepe sold another artwork called Crossroads for $6.6M.
Photo credit: Artsy

STATISTICS

Photo credit: Virtue Market Research

Many pundits view NFT as an expandable market. This ties to the fact that NFT addresses a variety of basic human desires. And they are right. Humans naturally tend to collect things we find beautiful or relevant, sometimes for just esthetics. We all want to have unique and meaningful identities.

For now, the obvious core categories for Non Fungible Tokens are Art, collectibles, luxury goods, games, and gambling. On an annual basis, the combined amount spent in these categories by 2020 was $1.05 trillion. It is quite safe to believe that there will be a reasonable rise in the 2021 post-pandemic recovery period. And so, from the standpoint of die-hard pundits, it is estimated that the total Non Fungible Tokens volume this year will be $20.8 billion.

Photo credit: NonFungible.com

According to NonFungible.com, in March, NFT buyers increased from 10,000 to 20,000 per week which led sales to surge up to $2.5 billion in the first half of the year 2021. On the 3rd of May, this year NFTs peaked and on that single day, $102 million worth were sold! A whopping $100 million of those sales was made up of crypto-collectibles.

The sales volume has remained high ever since. OpenSea is the biggest contributor, with an expected volume of $14.5 billion, representing 70% of the total. Then there are Axie and Infinity Top Shot, the two other most noteworthy singular platform contributors.

Photo credit: Loup Ventures

Despite these growths, prices of leading NFTs seem to be falling. We already mentioned that CryptoPunks is one of the most popular NFT projects, with a weekly average of $99,720. Well, it fell from there in early May. By the start of June, it was down at $50,840. Super rare digital art prices also suffered a record fall. It used to be $31,778. Then it fell to $5,342 in a similar timespan as CryptoPunks. Also, Protos’ data analysis indicated that overall sales plunged from a seven-day peak of $176 million on the 9th of May, to just $8.7 million on June 15. So volumes are roughly back at the point they were when 2021 began.

The NFT tech has been around since 2012. The first NFTs were “minted” by Kevin McCoy and Anil Dash in 2014. And in 2018 market capitalization for NFT was some $41M. And by 2019, that number nearly tripled, peaking at some $142. 2020 saw the market capitalization at $338.04M.

OPPORTUNITIES

1. Programmability

Non Fungible Tokens are programmable. Using blockchain-enabled technologies, one can program them to reflect and execute set conditions or rules given by the issuer. A good example is the recent issuance of NFTs for access to digital files which contained a new album release by the music group Kings of Leon. Some of them included software codes. Such software codes guaranteed buyers of the rights of the token to front-row seats at all future concerts of Kings of Leon.

2. Finance Decentralization

Non Fungible Tokens operate on decentralized finance. Here, assets and market participants function on a person-to-person basis. The preferred medium of exchange tends to be cryptocurrencies. And there are no intentions to have room for centralized intermediaries involved in the market. Still, it is worthy of note that NFT is currently competing to become the dominant marketplace.

3. New Digital Products

NFTs breed new digital stuff. The age-old structure of government-issued currency used as legal tender for business causes restraints on commercial transactions. The structure makes value exchange slow and cumbersome, and put strains on the creation and distribution of value. On the other hand, making assets easily interchangeable, whether those assets are physical or digital, and enabling easy valuation of new forms of assets (like social media reputation or other social behaviours) has a huge potential to accelerate digital business.

Here is an example: NBA began an initiative this spring called Top Shot Moments. This initiative creates video clips of memorable dunks or other scores in digital tokens. Here, data exchanges within the fan base and the NBA could become data assets. The good news is that it is possible to digitize any type of asset.

ISSUES & CONCERNS

There are many thrills around NFTs and their biome. Still, critics have raised concerns about some potential flaws, such as:

  • NFT value is volatile and intangible. Its value is based on social media hype.
  • The NFT market has many layers of devolution, making it not efficient and frictionless.
  • Underlying asset alterable, even erasable, or movable after NFT sale.
  • NFT buyers don’t essentially get automatic title or control over the main asset.
  • Investment risk — not every NFT appreciates.
  • Finding a buyer when you want to sell might be hard.

However, analytics companies like bitsCrunch have already taken steps to protect the blockchain ecosystem. Their AI-enabled securing services are built to protect the integrity of the blockchain ecosystem to ensure transactions are safer and more reliable.

MARKET GROWTH

Photo credit: dART Insurance

In 2020 alone, the NFT market value increased by 299% as published in the 2020 NFT Report. According to the report, the NFT market increased exponentially last year, attaining a value of over $250 million.

This lays the basis for the boom in the NFT market over the next 10 years. And what are we talking about? These: Digital art. Digital real estate. Digital toys. Digital trading cards. Digital assets in general.

And soon this digital asset market is likely to grow as big if not bigger than the physical asset market. After all, you have read, what do you think? We have presented multiple examples of growth here. And think about digital shopping? How is it now compared to physical shopping? Nearly everyone is shopping online now! And that is positively affecting the e-commerce industry, making it grow bigger than the physical retail market.

The same thing happened in digital entertainment. Nearly everyone now streams Netflix, Disney+, and HBO Max. And with that, the digital entertainment industry is just about becoming bigger than physical entertainment. Digital marketing too has become nearly better than physical marketing.

WHAT’S NEXT FOR THE NFT INDUSTRY

A nonfungible.com data opines that NFT is alive and here to stay.

  • Its biome has a very good rate of retaining new users (25%)
  • Its biome has recorded nearly 40,000 new users coming every 2 months.
  • Assets increased significantly, making them “very expensive” assets that only an elite can buy.

Even the recent slowdown does not have any negative signal for pundits. They do not see it as a dead-end for the market. But the bigger question on the lips of critics is its long term value.

About bitsCrunch

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