NFTs Are Back to 2021
The NFT market changed dramatically over the past year. Many people and dollars have exited. But plenty of people and dollars have stayed. I asked myself, as a startup operator, what should I know that can help me be successful in the current environment? What does the data tell us about the market opportunities right now?
The data tells us that we've reverted back to the characteristics of Q2 2021:
Weekly Trade Volume is between $50-100m
Ethereum is the dominant blockchain
Yuga Labs is the dominant company
Purchases are from NFT early adopters (not mainstream users)
Let's look at the charts.
Weekly trade volume is back to Q2 2021 levels, which is 1/10th of the levels one year ago.
Secondary marketplace volume is up 2x from Q2 2021, but down 10x from Jan 2022.
Ethereum remains the dominant majority of trade volume. (Dark blue is Ethereum in the graph.)
Lastly I compared Top 10 sales rankings all-time vs past 30 days for insights about what is working recently that’s different than historically. Some observations:
Yuga Labs and its ecosystem are 6 of the top 10 in the recent list, 4 of which are also in all-time. These include Bored Apes, CryptoPunks, Otherdeed, Mutant Ape Yacht Club, Bored Ape Kennel Club, and Mutant Hound Collars
Axie Infinity and NBA TopShot were on the all-time list and dropped out in the recent list. They are the two that accounted for the most new user adoption: their number of buyers and transactions are magnitudes higher than any other.
All the recent top 10 are built on Ethereum. Axie and TopShot were the two that dropped out.
2 of the 3 entrants on the recent list are offshoots of early adopter projects: Bored Ape Kennel Club and Mutant Hound Collars. The other one is Sorare which was started in 2018.
This suggests that the dollars being spent right now are by the early adopter crowd. As explained in Crossing The Chasm, these buyers are here for the new, and accept risks to be early to the trends. They seek adventure, status, and technology breakthroughs. They were buying NFTs before the hype. To make money today, appeal to that audience.
The mainstream will be harder to win. Perception of NFTs is low. Many have lost money, and are skeptical to place any price on NFT ownership. So NFTs need to include other value that mainstream users understand: merchandise, IRL experiences, insider information, and community.
The dollars are back to 2021 levels, but the number of companies today is much higher. Competition will be fierce. It’s a war time for businesses.