You must have seen or heard about it on the internet. Some bizarre-looking pixelated monkeys or awkward collation of digital pictures selling for $69.3 million. Perhaps your interest is piqued and you’re wondering what the fuss of buying mere digital arts for thousands of dollars is all about.
The NFTs market is growing at an incredible rate, attracting massive funds since it gained mainstream attention in 2017. From that time to Q3 of 2021, NFT sales records have maintained an uptrend and are now expected to reach $17.7 billion in sales by the end of this year. It begs the question: “What’s behind the market bull run?”, and more interesting: “How long can such an uptrend last in the coming years?”
This piece attempts to answer those questions, and more.
Brief on NFT historical market growth
Non-Fungible Token (NFT) is a unique digital asset that represents real-world objects like art, music, in-game items, and videos. NFTs are bought and sold online using cryptocurrency, most notably Ethereum. Details of transactions and ownership of assets are recorded and stored on a blockchain, making it impossible to hack or replicate an NFT once minted.
NFTs boomed in popularity in 2017 with the creation of collectibles and the ERC-721 protocol — a free and open standard that describes how to build non-fungible or unique tokens on the Ethereum blockchain. Sales soared during the first year maxing at 50,000 sales per week.
In 2020, NFTs weekly sales maxed at 80,000 per week, nearly 2-folds its 2017 peak. NFTs market’s total value of transactions increased by 299% year-on-year, reaching total sales of $340m, according to a report by NonFungible.com. The total number of active wallets transacting NFTs skyrocketed by 97% and the number of NFTs buyers and sellers went up 66% and 24% respectively year-on-year.
Despite the sales dips in February and June 2021, this year was even more shocking. NFT sales crossed the $1 billion mark in the first quarter of the year. By Q3, sales surged past the $10 billion mark, DappRader reported; an astonishing 3,047% growth from 2020 overall performance!
Total NFT sales are expected to achieve at least $17 billion by the end of this year. Beyond that mark, the turn of the market is difficult to determine. There are lots of factors and events within the NFT space that might hike or sink sales volume.
Now, let’s draw attention to the driving factors behind this exponential market growth.
Key driving factors behind NFT market growth
Believe in the use case and technology
Many NFT investors see the long-term value in the use or future valuation of NFTs. Currently, NFTs are widely used in blockchain video games where users buy accessories. In the future, this could expand to ownership of cars and even houses. A large percentage of investors are also bullish about the underlying technology behind NFTs and their further use cases and so pour lots of money into NFT projects.
Owning NFTs impacts investors’ social status within cryptocurrency communities. People buy Lamborghinis or Rolexes not necessarily because of their utility value, but also for how these items raise their social status. Therefore, owning NFTs can give an investor easy access to cryptocurrencies and crypto communities, which are usually of far greater value than the digital arts they own.
Big names are increasingly entering the market:
When big players like Microsoft, Tesla, Nike, Twitter, Meta (formally Facebook), Coinbase, and many more are entering a market, it will cause a buzz. These companies are integrating NFTs or creating different NFT-based projects and drawing tremendous interest in the space. Meta is thought to be at the forefront with their ambition to advance developments in the metaverse.
Appeals of tokenization through cryptocurrencies
NFT projects are usually powered by native tokens through cryptocurrencies. Many investors buy and HODL NFTs for the appeal of tokenization or the potential price gains of the NFT’s tokens. Others get into the markets to speculate and trade NFTs tokens for a profit.
With all these factors pumping demand and supply of NFTs into the billions, how long can it hold up for the foreseeable future? We base our opinions on current events happening within the NFT space.
Sustainability of NFT Market growth
New blockchains: While the Ethereum blockchain continues to dominate NFT market activities, there are growing interests in alternative layer-one blockchains — notably Solana, Terra, and Avalanche — which could offer cheaper transaction fees and faster block times. The progress of these blockchains might skyrocket demand for NFTs as they would become cheaper and easier to store.
Since NFTs are tied to the DeFi (Decentralized Finance) space which has a strong following, DeFi would play a part in keeping the NFT market growth afloat. As the usability of DeFi Dapps increases and more people get educated about their inherent values in relation to NFTs usability within Dapps, the demand for NFTs would increase.
Perhaps the biggest boost to NFTs demand in the coming years will be the Metaverse. Metaverses are immersive virtual worlds where the internet is brought to life. NFTs will be an essential part of the metaverse, serving as valuable assets within these virtual worlds. Already we can see use cases of NFTs in games like Axie Infinity. With future advancements in the metaverse, NFTs would adopt more use cases like never imagined surging its market demand.
NFTs market is expected to maintain its bull run for the time being. 2022 is looking especially bright as more developers, creators and companies are entering the space. And you could be a part of it, especially if you’re interested in the potential of NFTs in Africa’s untapped markets.
Creating, collecting, or selling digital African arts and real estate has never been easier. Simply visit AFEN marketplace — the leading NFT project advancing NFTs in African markets — to get started.
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AFEN NFT marketplace: afenmarketplace.com