According to blockchain analysts from The Block Research, the NFT market experienced a trend reversal in December 2021.
Cryptocurrencies suffer but NFTs on the rise
NFTs have been the breakout stars of the 2021 crypto market. However, they are not for the faint of heart, as the volatility in the broader crypto market pales compared to that of NFTs. After setting records for trading volumes in August 2021, the NFT market went through a slump, with steadily decreasing volumes between August and November. Over $4 billion AUD was traded in August compared to just over $3 billion AUD in November.
December marked a trend reversal, indicated by analysis of The Block Research, a blockchain analyst firm. Trading volumes increased 16.6% from the previous month against a backdrop of weakness in the crypto market. While still well short of its August high, several factors may have contributed to this rebound.
Are NFTs now in again?
One is the launch of MoonPay, a UK-based crypto payment firm that introduced a service allowing celebrities to purchase highly-valued NFTs like Bored Apes Yacht Club. Long a celebrity favourite, more stars bought into BAYC, with the likes of Post Malone, Jimmy Falon, Diplo, and DJ Khaled now boasting an ape. That incredible strength of BAYC contributed to the project flipping Crypto Punks for its floor price, the lowest valuation of an NFT on the market. While Crypto Punks have long been considered the “gold standard” of NFTs due to their collector’s appeal, BAYC brand strength and celebrity backing means there may be a new king in town.
Another factor for the uptick in December was the launch of several gaming-related NFTs that rose in prominence. The gaming sector continues to eye the new technology, with many people tipping NFTs as a revolutionary development for gaming. Albeit with problems, Ubisoft began experimenting with NFTs, as did Twitch’s co-founder Justin Kan, announcing and launching a gaming-focused NFT platform called Fractal.
Is Wall Street next?
With celebrities buying into BAYC, the focus will turn to more professional investors that may see the digital collectibles as a new asset class. BAYC’s net sales in 2021 were already 10% of Apple’s revenues and processed sales in the NFT sector in 2021 almost equaled the global art sales.
According to Matt Hougan, Chief Investment Officer of Bitwise Asset Management, wealthy clients are looking for exposure to the NFT market without getting their hands dirty with the admittedly unsexy user experience of acquiring one. His company launched a dedicated fund tracking several “blue-chip NFT collections,” including BAYC and Crypto Punks. Only institutional investors with at least $40,000 AUD to spare can buy into the fund.
Other asset managers are also bullish on the prospects of NFTs, which get the informal nod of approval by Meta focusing on the metaverse sector. If Meta bets on the metaverse, and the metaverse runs on NFTs, then betting on proven in-demand NFTs really becomes a no-brainer. Even though crypto’s short-term prospects are uncertain, blue-chip NFTs look well-positioned to stay around for much longer.