Is the NFT market still alive?

nft market

Has the NFT market been beaten by the Bear Market? Was it really a speculative JPEG bubble that has finally burst? I would say the NFT is wounded but not dead.

There is no doubt that the crypto market is not going through its best moments in 2022. It started with 2.4 trillion dollars of market cap and as of this article it is around 1 trillion dollars. Do the math…

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Source: https://www.coingecko.com/es/global-charts

Unlike the May 2021 market crash, where much of the capital was moved to the NFTs market due to the huge hype at the time, this time the non-fungible token market is also in red.

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Source: Own elaboration, data from Nonfungible.com

This is not the best time for hunting new NFT projects that explode after their launch or for NFT flipping experts who searched the market for those opportunities to buy and resell at a handsome profit.

But as a not blind NFT believer I would like to understand what happened during the first six months of 2022.

Interest in the web

In my opinion, one interesting indicator, very useful, related to this market is the volume of internet searches around the NFT theme. As evidence, no interest means no business.

So looking on Google trends we realized that the searches around NFT sector has dropped in the last quarter.

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Source: Own elaboration, data from Google Trends

The drop is especially significant since the January peak 2022. But if we look closer, the interest remains in similar figures than in September 2021, a considered NFT gold period. So, it is not so bad, is it?

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Source: Own elaboration, data from Nonfungible.com

As a curiosity, the top countries interested in the NFT sector are Nigeria, China, Hong Kong, Singapour and Georgia. The European countries are mainly concerned about the conflict in Ukraine and the increase cost of the energy and basic daily products rather than NFTs.

Key indicators

Let’s get down to business by reviewing some of the main indicators of the NFT market.

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Source: Own elaboration, data from Nonfungible.com

Almost all indicators are down in the second quarter of 2022, aligned with the cryptocurrency market and the global economic context. We can observe by looking at the chart above. The main indicators fall more than 20%. It is key to highlight the important HODL trend of the portfolios, the average holding duration increased by 55%, due to the lack of buyers (-25%) and especially sellers (-35%). NFT owners prefer to hold their assets rather than sell them at a loss. We can observe how the total accumulated profit (gain – loss) decreased considerably during Q2 to approximately $450 million, far from the $1.5 billion of the previous quarter.

Finally, also note that the average price of NFTs experienced a very slight drop of only 6%, while cryptocurrencies split almost by 3 during the period.

Break down by category

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Source: Own elaboration, data from Nonfungible.com

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Source: Own elaboration, data from Nonfungible.com

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Source: Own elaboration, data from Nonfungible.com

From the above tables, it can be concluded that the Metaverse and Utility categories are the winners. They have significantly increased their activity in volume of USD traded and number of transactions, respectively.

If we dig in the case of the Metaverse, the exceptional performance over the period in terms of the volume of dollars traded, mainly thanks to the sale of LAND by OtherDeed for OtherSide happened in May.

And the Utility NFT segment took off, more specifically Ethereum Name Service domain names, due to the rush of BAYC owners to buy domains with the names of their APE’s, paying more than 4 figures.

Compared to these two segments, which are considerably growing, almost the rest are underperforming over the period.

The collectibles segments remained dominant in USD traded volume (mainly thanks to bluechips), although they declined considerably during this period (-61%). Similar cases are the sales volume and active wallet categories, falling and almost one to one with the Gaming sector.

Gaming is the worst performing segment, dragged down by the decline in tokens associated with blockchain gaming. In the USD traded volume category, it is on the same level with Collectibles, but the drop in the number of sales and active wallets is more than 220% in both.

One thing to clarify is that the number of active wallets is not linked to the number of active players, as it is common to have several wallets to trade and some to connect to games.

Finally, the Art segment is one of the least impacted, it is the second in volume of USD transacted, although it lost 240k$ in this period. The number of sales was divided by two, but the active wallets resisted quite well with only a 28% decrease.

TOP NFT projects

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Source: Own elaboration, data from Nonfungible.com

We have a new leader in this ranking, it’s Otherside’s Metaverse project with $1.16B raised from land sales in May. And a company that controls 4 of the top 10 projects, you know which one? YugaLabs, in fact. YugaLabs is the studio that developed Bored Ape Yacht Club and Otherside, as well as buying Cryptopunks and Meebits a few months ago. In total an empire of NFTs projects that have moved a volume of $2.5B in Q2 2022. According to figures from the Nonfungible.com report, YugaLabs accounts for more than 30% of the NFTs market.

These figures also indicate how activity has been focused on trading assets in these BlueChips that retain value better and can even increase during a bear market.

Conclusions

One of the keys to profit from NFT trading, known as flipping, is to be aware of how the market is doing and right now it is clearly not very favorable at all. However, activity continues, as well as the interest in acquiring NFT from the best projects.

This is a widespread scenario, and not just in the crypto world but with global economic implications. Conflicts, rising energy costs, increasing commodity shortages, rising commodity prices, financial crisis…. An explosive cocktail!

Despite all this, NFT projects continue to evolve and provide more value as the entire industry understands the potential they have and how to make them useful.

NFTs are not dead, they are in a reconstructive lethargy that will be beneficial to the industry as it will put each project in its place.

At Belobaba we firmly believe in the future and the power of NFTs, but the real good ones. That’s why we put our efforts in analyzing the projects in order to bring our investors the next bluechips.

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