NFTs - a short overview of the market

BoredApes, Cryptopunks, Axies, ChromieSquiggles and many other non fungible Tokens (NFTs for short) have seen a huge explosion in the last 12-18 months. Some of these NFTs traded for 150 ETH or more. The price of an ETH (the native cryptocurrency of the Ethereum Blockchain) is at $1.247 today on January 6th 2023. The most expensive NFT ever sold was "Everydays: The first 5.000 days" by Mike Winkelmann a.k.a. Beeple for an astonishing price of $69.3 million.

Whilst the growth of the NFT Space is mind-blowing for sure, the real value lies in the fact that artists finally have a chance to get a fair compensation for their art without interacting through a middleman, who takes the biggest cut. The network effects of music labels like Interscope, Columbia or platforms like Spotify, Etsy, Adobe-stock, Envato and others are likely going to be diminished the more the NFT space picks up and the more artists learn about the new technology and its exciting possibilities. Other industries like automotive, luxury goods and fashion brands are beginning to follow.

The new way for artists to "shill = sell" their art is direct. Twitter-spaces, Discord Channels and Telegram Groups are living proof of the new way for NFT-collectors and Artists alike to be in business with each other. You like a song or piece of generative art? Nice, just send a fraction of ETH or SOL to the artist's wallet. You do not need more than a wallet (e.g. Meta-mask) and access to a marketplace (e.g. Rarible or OpenSea) to be in the NFT space.

But there is also a downside to this and unfortunately the NFT space suffers from a bad reputation - Scams, Rug-Pulls, Wallet Poisoning and NFT Washtrading are just some of the ways in which bad actors might try to get your hard earned cryptocurrency. It is all too easy to "blind-sign" a transaction and get your funds siphoned off your wallet. Extra vigilance, self-education, due diligence, wallet security, being able to read a smart-contract and a healthy dose of criticism are absolutely necessary to not fall for the latest "shill". FOMO (Fear of missing Out) was and still is powerful with traditional Cryptocurrencies but it is even stronger in the NFT-Space where no one wants to miss the latest Mint. I can see it everyday in my own Twitter-Feed and Telegram how much hype there can be for a single NFT project.

Now let us look at some official Chainalysis numbers dating back to 2021 and 2022 knowing that we will release our latest global stats very soon.

High Level Numbers

NFTs saw an explosive growth in 2021 but this growth has not been consistent and has leveled off since. In Q1 2022, 950,000 unique wallet addresses bought or sold an NFT, up from 627,000 in Q4 2021. This shows how early the market still is. If we consider that some 300-500 million people globally interact with Cryptocurrencies in some shape or form, then the NFT-space is really small.

What is the geographic distribution of NFTs like?

We as Chainalysis have analysed web-traffic data and combined them with On-Chain data and what we have spotted is that this brand-new asset-class attracts users from all over the globe. In terms of Regions it is clear that Central and Southern Asia lead the way, closely followed by North America and Western Europe.

Who is investing and collecting?

The analysis of NFT transaction sizes tells us that the vast majority of NFT Transactions are at the retail size (means you and me) below $10k worth of cryptocurrency. NFT-collectors ($10k-$100k of Cryptocurrency value) grew significantly in 2021 but stayed flat since then.

As with all numbers in the Crypto-Space, there is a significant variance involved YoY and sometimes MoM and we have to see what the latest numbers from the Chainalysis Research team will tell us in 2023.

If you ever want to dig deeper into some serious stats on topics like DeFi, DAOs, NFTs or the Metaverse, then look no further and download the full "State of Web3 Report" which can be found here, it is the industry's reference manual on the numbers in this space.

Thank you very much for reading.

#NFTs #Web3 #DAO #MetaVerse #DeFi #Chainalysis