The market for non-fungible tokens (NFTs) kicked off 2022 with booming sales in January in sharp contrast to the overall slump in crypto prices, a development insiders say can be summed up in one word: Decoupling.

By the numbers, leading NFT marketplaces LooksRare and OpenSea saw record sales in the month with a combined US$12 billion. At the same time, the total capitalization of the crypto market dropped almost 25% within the month to about US$1.6 trillion.

It seems counterintuitive that an asset bought and valued in crypto becomes decoupled from crypto prices, but one industry official said it reflects differing buyer profiles and needs. Wall Street discovered the potential of blockchain and dipped into crypto markets, but the typical NFT trader is outside that world of high finance. This split also suggests NFTs as an unlikely hedge against the broader crypto markets. 

“Non-crypto people are coming in for the first time into the [NFT] market and increasing the [number of] unique buyers,” Yohan Calpu, chief blockchain officer at U.S.-based NFT price aggregator, said in an interview.  “People who are buying NFTs are interested in culture and art, people who are buying crypto are interested in solely an investment or a risky asset.”

That’s a view echoed by Jonathon Miller, Australian managing director of crypto exchange Kraken.

“NFTs are detaching from the rest of the crypto space when it comes to pure financial services type infrastructure,” Miller said in an interview. “NFTs have their own drivers and we’re seeing that play out in the early months of 2022.”

The numbers speak to the demand for NFTs, with 770,000 unique NFTs buyers in January so far, according to data from CryptoSlam, a jump of almost 2,500% from the 30,000 reported in January 2021.

Despite declines in underlying cryptocurrencies, NFT prices have shifted very little, even as an NFT priced in ETH would have lost 40% of its value in U.S. dollar terms since Jan. 1. 

However, Miller says he does not see NFT prices increasing to further offset the overall drop in crypto valuations in part because prices on NFT marketplaces move more slowly than listed crypto prices on exchanges.

Crypto prices are much more fluid and are constantly updated to reflect the market, while NFT prices are dictated by auctions that occur far less often, or can only be changed by updating the smart contract underpinning the listing. This incurs a cost, meaning people are reluctant to do so and will be more likely to leave an NFT at its listed price for a longer time, regardless of the fluctuating value of crypto.

One NFT trader said many investors base their sense of value on the item rather than the fluctuation of the underlying cryptocurrency.

“The value of coins does not really intimidate me, it’s more the price of the NFT itself,” says Patricia Dy, curator of the Grey Space Gallery in Manila, told Forkast. “I think when everyone’s on the NFT market, you start not seeing [token] prices, but rather investments.”

Dy began investing in NFTs late last year, seeing them as a way for digital artists to earn extra income. She believes they are the future for the industry and intends to exhibit NFTs in her gallery in the near future.

Calpu at CryptoSlam said falling crypto prices are a good thing for the NFT market — up to a point — because overall it makes them more affordable for newcomers. Although that is little comfort to anyone wanting to buy a Bored Ape Yacht Club NFT on OpenSea with a floor price of 75 ETH, currently valued at over US$200,000.

“Long term, this is great for NFTs because they’re developing a market of their own,” Calpu said. “If crypto continues to fall, [then] that could be off the table, but if we see lateral movement across the crypto market, then I think it helps NFTs.”