Predicting a disruptive invention like NFTs (Non-fungible Tokens) prior to the advent of blockchain technology would have been insane. However, here we are, with so many people attempting to board a train that has already departed the station since May 2014, when the first NFT was issued.
If you are wondering, NFTs, just like cryptocurrencies, are also digital assets, albeit, with a slightly different underlying infrastructure which is responsible for the obvious difference between the two. In context, these digital assets are represented by real-life objects like artworks, in-game pieces, songs, collectibles, images, and many more.
However, Unlike cryptocurrencies, NFTs are not interchangeable; instead, they are bought and sold on a decentralised marketplace utilising cryptocurrency as a medium of exchange.
Despite being around for more than half a decade, NFTs have just recently exploded in popularity, attracting the attention of both investors and the general public. With the most expensive NFT artwork, a massive compilation of artworks by Beeple, recently selling for as high as $69 million, there has been growing interest in the space.
For instance, a CNBC report revealed that NFT sales surpassed $2 billion in the first quarter of 2021, with the number of buyers and sellers doubling. According to the report, the total value of NFTs sold during the quarter increased by more than 20 times if compared to the corresponding quarter in 2020.
Notably, NFTs are revolutionising the dynamics of cryptocurrencies and the application of blockchain technology in general. However, it is still unknown if they will be able to withstand the test of time.
Furthermore, as the demand for NFT assets grows and more investors join in, it’s vital to keep an eye on key major industry trends that can help forecast the future outlook of NFTs. So, what trends should you look out for in the NFT market? The following subsections examine a few of these trends
Fundamental indicators, such as all-time sales, active wallet or unique purchasers, and energy usage, define the scalability of a virtual asset, as they do in most cases. At the time of writing, more than 97,000 NFT valued at $865.6 million have been sold, according to Nonfungible, a platform that provides real-time statistics for the NFT market.
The number of sales, as reported by Nonfungible is made up of over 31,000 primary sales, and over 65,000 secondary sales, adding that the primary sales alone accounted for approximately $26.5 million. Also, the platform indicates that there are nearly 52,000 active market wallets.
While nonfungible statistics account for a small fraction of NFT activity, it excludes major events such as the sale of Beeple’s massive compilation artworks and even the NBA’s top shots. The statistics, on the other hand, can give you a lot of information about the market as a whole.
Another common trend among the majority of blockchain-based virtual assets including NFTs is the amount of energy consumption, which is frequently linked to environmental degradation.
Because most NFTs are built and distributed on the Ethereum blockchain, they consume the same amount of energy as the underlying infrastructure. To put things in perspective, each transaction on the Ethereum platform consumes about 48.14 kilowatt-hours of energy, which is equivalent to a typical utility customer’s electricity consumption for two days in the United States.
Although there are ongoing efforts to use renewable energy for blockchain transactions, it may take a little while to achieve. As such, this particular trend is very crucial when forecasting the outlook of the NFT future.
Fastest growing and largest NFT market segment
Although NFT artworks remain the most patronised, there are other NFT market segments that are also gaining popularity in recent times. For instance, in the Sports segment, NBA top shot has spurred a lot of interest among basketball fans, as well as the general public. Similarly, other segments like collectibles, artifacts, music, virtual real estate, and games are also steering wild interest among investors.
Top NFT sales and the most expensive NFT to be sold
While there are thousands of NFT sales, some notable ones have made it to the mainstream because of their massive and outstanding value. Notably, Kelvin McCoy’s ‘Quantum,’ which was also the first-ever NFT to be minted in May 2014, sold for a whopping $1.58 million despite being brand new to the market.
In recent times, Beeple’s massive collection of artwork sold for $69 million sometime in March 2021. Similarly, Twitter CEO, Jack Dorsey also made it to the front pages of publishing houses after his first-ever tweet was sold as NFT for $2.9 million.
Other notable NFT sales include Sotheby’s ‘Native Digital cryptopunks (28 lots) which sold for $17.1 million; Edward Snowden’s ‘Stay Free’ at $5.4 million; Philip Michah’s ‘Mad Dog Jones’ at $4.1 million; Don Diablo’s ‘Destination Hexagonia’ at $1.2 million; Kelvin Abosch’s ‘Forever Rose’ at $1 million, and many more.
With investors willing to pay high prices for outstanding NFTs, it is clear that the digital asset has a bright future.
NBA top shot
Powered by Dapper labs, NBA Top Shot is one of the most visible NFT successes and by far the most trending sensation within the sphere in recent time. The marketplace allows NBA supporters and lovers to buy, sell, and trade NBA moments. These moments are packaged as highlight clips and are represented as trading cards.
As of May 2021, NBA Top Shot was valued at over $2.6 billion, with over $500 million in NFTs sold. Furthermore, the marketplace has an average daily sales of $4 million, which is expected to grow as more participants join.
The NBA Top Shot is another trend that has sparked enormous interest within the NFT market and is a major segment driving the market’s long-term success.
The rise of NFT virtual real estate (talk about Decentraland)
Aside from artworks and NBA Top Shot, the virtual property is becoming a popular investment option in the NFT market. Buying virtual land, like buying real estate in real life, is quickly becoming a trend, with platforms like Decentraland and Opensea leading the way.
For instance, the most expensive piece of virtual land was recently purchased for $900,000 on Decentraland, an online world that combines virtual reality with the Ethereum blockchain technology.
On a platform like Decentraland, the ownership of a digital property such as land, or in-game items can be bought and sold in form of NFTs. In addition, users can also explore the virtual world, attend events, and showcase their artwork collections which can also be acquired by other users.
While virtual real estate is still a relatively new segment with growing popularity, it is one major trend to keep an eye on when forecasting the outlook of the NFT market.
In the crypto space, Yield farming refers to to the practice of staking i.e invest, or lending crypto assets in an attempt to generate high returns or rewards in the form of additional cryptocurrency.
In the same manner, NFTs such as collectibles, in-game items, and their likes can now be staked in a liquidity pool, where other investors can participate in an activity such as a game to earn additional NFTs in this case.
GameFi platforms like Bunicorn, for example, allow gamers to demonstrate their gaming abilities and win rewards in the form of NFTs. Not only that but these incentives may also be used to earn yields within the gaming platform. Gaming dApps accounts for the majority of platforms that offer NFT yield farming, and they are quickly gaining traction in the NFT market.
The music industry is not left out in the NFT craze as more celebrities are now jumping on the moving train. Notable celebrities like Snoop Dogg, Boy George, Grimes, King of Leon, among others rake in millions in recent time by selling music and arts as NFTs, and the rave is still ongoing.
Because of how it is built, NFTs are playing a pivotal role in the ongoing revolution in the creative industries, including art and music. Notably, NFT delivers two key elements in the creative industry: authentication and scarcity. By providing certification for each digital content, a collector can own the exclusive right to the copy, hence increasing the asset’s scarcity.
Not only are musicians using NFT to generate income, but they’re also experimenting with it as a medium of releasing new albums. Kings of Leon, for example, were the first band to release an album as an NFT, which included additional benefits with the purchase.
While still a work in progress, this segment of the NFT market is significant because it has the potential to revolutionise the music industry in terms of song ownership rights.
Integration into Defi and portfolio management
Integration with the decentralised financial system, as well as portfolio management, is another significant trend for NFT. Because NFTs are a collection of digital assets such as art, music, in-game items, virtual land, and many more, it is simple for corporations and even individuals to plug into the new financial system.
In the same vein, portfolio management companies will also need to integrate NFT-based assets into their otherwise centralised systems to leverage the advantage of the emerging market. Already, this is playing out for some companies like Lobus who is attempting to bridge the gap between NFTs, as well as its financialisation.
Finally, artworks, collectibles, and, more lately, NBA Top Shots are the most popular NFT segments owing to their accessibility. While the future of NFTs is mostly unknown, they may play a more important role in the future of decentralised financial systems, particularly as a novel approach to collateralisation.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.