What assessment for the NFT market in 2021?

The total value and average volume of NFT transactions has skyrocketed in 2021. However, beware of hasty investments: Only a very small group of connoisseurs will profit in this market, warns Chainalysis.

In 2021, almost four years after its infancy, the NFT market experienced spectacular consumer enthusiasm. As a reminder, it’s a matter of exchanging unique digital objects based on blockchains, non-fungible tokens. A practice designed just as much for collectors eager digital art as for artists eager to regain control of their works. But this practice has also been taken up by many speculators in their search for strong return on investment and has led to more or less eccentric transactions this year.

Thus, a jpeg was sold for $ 69.3 million, Jack Dorsey’s first tweet for $ 2.9 million, the video Charlie bit me! for € 623,000, the World Wide Web source code for $ 5.4 million, meme Disaster girl for $ 400,000 … Halfway through the year, transactions already accounted for more than $ 2.5 billion in sales.

Whether you stick to the concept or not, NFTs are now part of the digital landscape: Sorare, a game with fantasy football Based on these non-fungible tokens, completed the largest fundraising ever recorded by a French start-up, football clubs are interested in it, as are Twitter and Coinbase. Idem the subject was in the debates of the National Assembly.

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All of this took place a few months after the NBA launched Top Shot in late 2020, a platform that brings together the best moments from the prestigious American professional basketball league and helped kick-start the mainstream movement.

An increasingly valuable asset class

As the end of the year approaches, what conclusions can we draw for this market where the value lies in the data stored on blockchains, where the most important is ethereum? A report published Monday, December 6, 2021 by blockchain analytics specialist Chainalysis gives you the opportunity to get an idea.

First, between January and October, nearly $ 27 billion in cryptocurrency was allegedly transferred to ERC-721 and ERC-1155 contracts, the two types of Ethereum smart contracts associated with NFTs. Both the total value and the average transaction amount increased sharply from the summer of 2021, suggesting that NFTs as an asset class are growing in value, Chainalysis says.

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The vast majority of NFT trades are thought to be below the $ 10,000 mark, reflecting strong activity from retail investors. Note, however, a sharp increase, especially from the summer of 2021, in transactions for amounts between $ 10,000 and $ 100,000, a segment that Chainalysis defines as collectors. Transactions over $ 100,000, mainly from institutional players, are virtually non-existent in volume (less than 1% of all transactions). But in terms of value, things are different: the collector’s segment then represents 63% of the market, 26% of institutional actors and only 11% of individuals.

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Preferred decentralized and P2P exchanges

What have users exchanged? In particular, digital works belonging to the collection, which came on the market very early, CryptoPunks ($ 3 billion in transaction volumes between March and October). Collections like Mutant Ape Yacht Club or Hashmasks also experienced significant peaks. In terms of user location, they are mostly located in Central and Southeast Asia, North America, Western Europe and Latin America. “Like conventional cryptocurrencies, NFTs have gained global popularity”it is stated in the report.

Next, OpenSea, a peer-to-peer (P2P) marketplace, is by far the most widely used platform for NFT trading with $ 16 billion received. The report also notes that NFT enthusiasts prefer decentralized and P2P exchanges over platforms that manage downloads like Dapper Labs.

Investing in NFTs, a Good Idea for Speculators? No investment is foolproof, but Chainalysis notes two statistics. On OpenSea, only 28.5% of NFTs purchased during the process of minting (registering and validating the asset on a blockchain) and then reselling leads to a profit. In contrast, 65% of NFTs purchased on a secondary market (existing assets) show a positive return on investment. However, be careful before placing all your savings in a non-fungal token: “the data show that a very small group of very well-informed investors reap the majority of the profits”adds the report.

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