Sales of non-fungible tokens are stabilizing after a steep decline earlier this year, as a handful of new products and initiatives reignite enthusiasm for a market that lives and dies on hype.
NFT’s weekly sales volume is still about half of what it was in January, when there was a blitz of major sales and celebrity collaborations. But the market is recovering, with weekly volume up about 32% from the March low, according to data from Nansen, a blockchain analytics firm.
The NFT market remains small, but it is gaining momentum as new products aim to entice users to trade items like digital art of cupids or penguins. This week, a new NFT index was launched in addition to a trial version of a market by Coinbase Global Inc., which may lead to increased trading. There were around 200,000 daily unique wallets interacting with NFTs in the first quarter, according to DappRadar. Meanwhile, Coinbase had around 89 million verified users at the end of last year.
“The NFT market is going through a period of consolidation with volumes starting to rise again,” said Pedro Herrera, senior data analyst at DappRadar, which tracks decentralized applications.
On Wednesday, Index Coop launched the JPG NFT Index, which allows investors to bet on top-notch NFT collections like CryptoPunks by purchasing a single token on crypto exchange Uniswap. Already, “demand has been exceptional,” according to a group methodologist who poses as Joseph Knecht, a character from Hermann Hesse’s “The Glass Bead.”
“Premium NFT collections show remarkable strength,” Knecht said. “There’s also a new wave of artistic and technological innovation that suggests the current cycle is just beginning.”
New developments from Yuga Labs, the creator of Bored Ape Yacht Club, one of the most successful NFT collections, could also fuel the excitement. In March, the group raised $450 million for an expansion. His new ApeCoin now has a market value of around $4 billion, according to CoinMarketCap. Additionally, last week Coinbase announced a series of Bored Ape movies.
Whether the current recovery will last remains to be seen. “Given the macroeconomic outlook, it may be too early to interpret whether this rally is short-lived,” said Nansen analyst Louisa Choe.
The NFT market is subject to wild fluctuations. According to Nansen, one in three NFT projects have little to no commercial activity, as users often quickly move on to the next, brighter piece of digital art.
“I expect to see a lot of ups and downs over the next few months,” said Aaron Brown, a crypto investor who writes for Bloomberg Opinion. “We’ve seen successful launches with less hype than previous NFTs… But I’m not excited about the weekly news.”
© 2022 Bloomberg