NFT Market Update: After NFTNYC
NFTNYC Happened in June, here is our analysis of the market.
NFTNYC Happened in June, here is our analysis of the market.
TL;DR:
Appetite for NFT’s isn’t slowing down. Big players are entering the space. We attended NFTNYC and provide our takeaways below.
NFTs are eating the Internet
In August of 2021, we wrote about the huge volumes of the NFT market when it did $3B in volume in one month. The chart looked shocking:
As a reminder, a NFT, or non-fungible token is a unique, digital, tradable asset on the blockchain. This could come in the form of an image, a music file, or a video game character. They are built on smart contract-compatible blockchains like Ethereum, which currently has the majority of NFT usage right now. NFT’s don’t have to be native to Ethereum though and are booming on other blockchains like Solana, and layer 2’s like Polygon.
It makes sense to think that NFTs were in a bubble last fall based on the graph above. However, as you can see here, NFT volumes remained elevated, peaking in January 2022 before crashing with the overall crypto market in June.”
Opensea Monthly Volume
While the June volume drop off has been substantial, it’s important to remember that these volumes are in USD, not ethereum. The NFT’s are being valued and traded in ethereum, which has fallen 75% relative to USD. The buying and selling and user metrics have been showing strong fundamental growth, demonstrating that the drop off in volumes have more to do with the broader crypto market sell off and less to do with the demand for NFTs.
Total All Time Users: Opensea
Web 2.0 is making a big push into NFTs
Since we last covered this market, these giant Web 2.0 companies announced their plans for NFTs:
Meta - Announced plans for digital payments and NFTs
Twitter - Adds NFTs as profile pictures
Reddit - Launches NFT Avatar project
Instagram - Introducing Digital Collectibles to showcase on Instagram
Disney - Added Polygon to their accelerator program
Gamestop - Launched an NFT marketplace
Does anyone think this list isn’t going to get bigger?
Daily Active User (DAU) data for Web 2.0 social media companies:
Combined, these companies have 2.7B DAU. Even with 1% of their users using NFT functionality, that yields about 27M DAU, which would more than 10x the amount of NFT users overnight. 10% of Web 2.0 users would roughly 100x the market!
Given that the average Opensea user spends has spent over $15,700 on NFTs [source], napkin math makes this a vastly larger market than it is now.
Key Takeaways from NFT NYC
1. General Sentiment around NFTs is high
FirstWatch spent time at NFT NYC and saw everything the city and conference had to offer: there was everything from a protest to celebrities and concerts. Many who have become friends online as part of communities now were meeting in person. It was exciting to see incredibly innovative ideas and also to receive an overall sense of how the NFT community is looking. (Read: it's not dead).
The space has evolved from a niche corner of the internet into a worldwide industry and mass retail crowd. Of course skeptics remain unhappy and find it all too cringy/speculative, while those at the other end of the spectrum embrace it and called this the path towards mass adoption for crypto as a whole.
2. Bullish on the Power of Communities
If there is anything you should take away from reading this, it is that NFT communities are here to stay. We are at the early stages of what these communities can do and become.
Crypto and web3 have proven that they are great at harnessing the power of online communities. The main driving factor of NFT NYC wasn't even the main conference event itself, but rather the different parties and pop-ups that formed around different types of NFTs. People wanted to meet up more than they wanted to sit around idly in a conference seat. We saw this with the focus on large meetups such as ApeFest, Cool Cats, and Doodles: each had a party and prominent names, including Snoop Dog, Eminem, and Pharrell Williams. However, even the smaller, less-known PFP projects had meetups where holders and non-holders alike just wanted to meet people IRL with whom they have spent months online.
3. Tackling Creator Economies and Retail Adoption
One big idea that stood out throughout the conference was how NFTs have transformed the world of creator economies.
A creator economy is an ecosystem in which content creators are rewarded by their fans for what they make , moving away from big centralized sites that extract most of the value.
At the conference, there was a big push toward how creator economies can form more direct relationships between fans, developers, creators, and users. Artists, rappers, athletes, celebrities, and so on can use NFTs to connect with their fans directly. NFTs allow creators to earn revenue for their projects while also giving them the ability to return value to their supporters. Specifically, a famous artist could release an NFT for its top consumers, which entitles holders to receive future airdrops for special perks or private events. Once again, the blockchain is cutting out the middleman, here, social media companies and middlemen such as Ticketmaster.
NFTs help answer the questions of how the retail crowd could be drawn into this world and how it can all be seamlessly and simply integrated with communities. One successful example was how NBA Topshot brought sports fans into NFTs. Since then, every major sports league has released their version of Topshot and athletes have released their own projects.
4. NFT Use Cases
While many speakers maintained a theoretical overview of the space, some great ideas were presented in the main panels about what the technology can do. Here are some examples:
Tokenization for investment/speculation
Hotel bookings, Real estate, Futures contracts
NFTs as Tickets
Concert tickets, restaurant reservations - remember, the originator can make money off secondary sales.
Tokenization for social goods
Health data, Energy data, Memorialization, Financial infrastructure or identity
Lending markets for non fungibles
Using NFTs as Collateral, Tying oracles to real-world assets
Without diving into how each individual one works, each essentially has the power to revolutionize the industry that it is in as they all bring novel aspects of the blockchain to traditional models. Combined, they create a whole new digital economy in which access is democratized and we can discover the fair market value of new assets.
5. Uniswap Announcement
The company recently surpassed $1 trillion in total volume, bolstering the view of Uniswap as the most important defi primitive.
Uniswap Labs acquired Genie, the first NFT marketplace aggregator. They allow for transactions across all NFT marketplaces and are expanding into more networks. The view is that more projects will create their own marketplaces in order to set their own rules; Genie will be able to integrate these marketplaces into the biggest defi trading platform. This is huge for Uniswap and NFTs.
Resources:
A Cryptopunk sold this week for 2,500 ETH, roughly $2.6M.
Thanks to @rdelatowerPR for his contributions.
➡️ About FirstWatch Crypto ⬅️
FirstWatch Crypto was started by Dan McGlinn (@DigitalDanMcG) and John "Blaize" Hrabrick (@blaizebitcoin) who have been investing in the space for a combined 8 years. FirstWatch Crypto is on a mission to simplify the crypto investment landscape.
Disclaimer: None of the above is investment advice. This blog is published for entertainment and informational purposes only. The ideas expressed are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. Nothing on this blog constitutes investment advice, performance data, or any recommendation that any security, portfolio of securities, investment product, transaction, or investment strategy is suitable for any specific person. You should not use this blog to make financial decisions. We highly recommended you seek professional advice from someone who is authorized to provide investment advice. You should always do your own research before investing in cryptocurrencies. It is a volatile market.