The non-fungible token (NFT) market has broken out of the so-called bear market despite the tepid environment for risk assets amid interest-rate increases.
NFT sales tracked by CryptoSlam grew 48% month-on-month in April to more than US$3.6 billion, data by CryptoSlam showed. That number was at about US$2.5 billion in March, data from the cryptocurrencies data aggregator showed.
The NFT market was down 26% on average between January to March. The so-called bear market refers to when an asset drops 20% or more from its recent highs.
Interestingly, despite the 15% drop in the number of buyers from when the NFT market started experiencing a downturn in February, sales in April were up by more than US$600 million in comparison to that month. April’s strong set of numbers were higher than March in terms of both the sales value as well as the number of buyers.
“The market is maturing and investors are being more selective of what they purchase,” said Yehuda Petscher, a strategist at CryptoSlam.
“Savvy investors tend to put more focus on the expensive blue chip NFT projects like BAYC (Bored Ape Yacht Club) [or] CryptoPunks,” he added. “So they’re probably transacting less frequently but in much bigger ETH (the cryptocurrency most commonly used for purchasing NFTs) amounts.”
Among the highest performing collections in April were BAYC and sister project Mutant Ape Yacht Club, witnessing over US$300 million in transactions each in the past 30 days.
Overall, investors spent over US$37 billion on NFT marketplaces this year through May 1, compared to US$40 billion in all of 2021, according to the upcoming State of Web3 Report by Chainalysis.
The Other Side
While not technically recorded in April’s data, the ongoing success of these projects foreshadowed the debut sale for their expanded metaverse project, the Otherside, whose NFT land sale in the form of “Otherdeeds” sold roughly US$750 million in under a week through since its launch on April 30.
The launch was so popular it clogged the Ethereum network and drove gas fees or the fees associated with transacting on the network, as high as three to five ETH per transaction (US$8,300 to US$13,500 at the time), prompting developers to integrate the project into Polygon — a layer 2 sidechain of Ethereum — in the hopes of reducing congestion on the network.
While Otherdeeds sales figures were not included in April’s sales data, it’s already starting to influence May’s numbers.
“Otherside will be a key factor in the growth of metaverses, and a catalyst towards the shift to play-to-earn [P2E],” Petscher said. “The NFT space was already heading in that direction, but if the biggest NFT brand in the world is shifting their focus on P2E, you can expect the rest of the space to do the same,” he added.
Another recent successful debut was the Okay Bears collection on the Solana network, which sold out within 24 hours and helped the Solana network cross over the US$2 billion total sales mark shortly after.
See related article: Okay Bears NFTs record sellout helps Solana net US$2B in sales
After launching on April 27, the Bears have already crossed more than US$60 million in sales, making them the fourth most popular collection on Solana already.
The Solana network suffered yet another network outage in early May — one of several within the past year — as bots flooded its NFT minting tool “Candy Machine”, overwhelming the network with more than six million transactions.
The network was down for roughly seven hours before being restarted. While these instances have raised concerns over the network’s stability, Petscher does not expect Solana’s NFT ecosystem to suffer in the long term.
See related article: Solana loses consensus after bots flood network, SOL takes hit
“Blockchain issues may not register with them (buyers) any more than a temporary website outage would,” Petscher said. “As long as there are gains to be made, and fun collectibles to buy, people will use Solana for NFTs,” he added.
NFTs ride their own wave
The last NFT market dip in March corresponded with a short-lived revival of the cryptocurrency market.
The crypto market capitalization steadily grew to reach a two-month high of over US$2 trillion dollars by the end of March. That number has since dropped by more than 20% to its lowest point in more than three months at US$1.7 trillion, according to CoinMarketCap.
This has led to some claims of the NFT market being inversely correlated to the crypto market, with investors willing to spend more of their cryptocurrency when it is worth less in U.S. dollars.
But Petscher believes there is more to it.
“Crypto moves along with the stock markets but NFTs are riding their own wave,” Petscher said. “NFT cycles seem to move around major NFT news, and not much more,” he added. “This may be typical with new asset classes, so over time as NFTs become even more mainstream, they will probably fall into more typical patterns.”
He expects the market to mirror its trajectory from last year in which it cooled in March through to July as major blue-chip projects released their new P2E elements with NFT integrations later in the year.
“More P2E experiences are coming from not just [BAYC owner] Yuga Labs, but from all corners of the metaverse, so we’re excited for a fun year,” Petscher said.
