NFT sales decline sharply, defying reports predicting growth

Sale volumes of non-fungible tokens (NFTs) around the world have seen a sharp dip over the past week. While reports from previous quarters had already documented a cooldown in NFT marketplaces, NFT sales from the past week – even across the biggest and most prominent NFT collections – have taken a tumble in terms of volumes and total sales, according to NFT market trackers.

NFTs are unique ‘tokens’ that are stored on blockchains. These tokens have a unique digital signature, which denotes a piece of artwork or any other digital property, such as a tweet, as completely unique on the internet. As a result, these tokens can be traded or auctioned, thereby adding value to digital properties such as images produced by digital artists.

While the popularity of NFTs shot up through 2021, the past one week has seen a steady decline in trade volumes and total sales of NFTs. According to weekly trade volume data from cryptocurrency and NFT market tracker The Block, sale volumes across art and gaming in the week starting April 17 was $369.67 million. Over the past three weeks, this volume has declined by 49.2% to hit $187.62 million.

Data from other market reports back this up. NFT tracker NonFungible states that over the past week, the total number of NFTs traded has declined by 69.1%, and total sales have declined by a whopping 94.9% – down from $780.43 million a week ago, to $40.16 million as of Sunday, May 8.

The decline incidentally comes in the same week when a report by market research firm MarketsAndMarkets claimed that the global NFT industry, which presently has a market cap of around $3 billion, could grow at a compound annual growth rate (CAGR) of 35% to reach $13.68 billion by 2027. The report said that factors contributing to the growth would include an “increased influence of celebrities”, rise of digital artworks, bigger gaming communities and adoption of NFTs among mainstream social media influencers.

However, the report’s NFT market cap valuation is in contrast to other industry sources. Data from crypto asset price tracker CoinMarketCap states that the entire NFT industry is worth $10.5 billion already.

Any growth in the NFT space is not apparent at the moment. NFT data aggregator CryptoSlam that over the past seven days from May 8, NFT sales have declined by 28.7% week on week. Ethereum and Solana, two of the biggest blockchains used to mint NFTs, have seen NFT trade volume declines of 30% and 14.7%, respectively. The two blockchains account for the biggest NFT sale volumes across the industry – as of the past week, Ethereum accounted for $958.23 million of NFTs, while Solana accounts for $94.1 million.

Market activities have also suggested a cooldown in the NFT space. In April, Sina Estavi, founder of crypto startup Bridge Oracle and owner of the first-ever tweet made by Twitter co-founder Jack Dorsey, attempted to sell the latter in an NFT auction. While Dorsey had sold his tweet as an NFT for $2.9 million, Estavi set an asking price of $50 million for it. However, it only received a highest bid of $280 upon the official closing of the auction, which went up to around $5,000 in a post-auction bid – only a fraction of Estavi’s asking price.

Earlier in April, a Snoop Dogg NFT, titled Doggy #4292, was put up for auction for $25.5 million, but only received $210 as the highest bid.

Such incidents show that the aspect of hype around NFTs is dwindling, compounded by other factors such as rising inflation and weak financial markets around the world. Experts who spoke to Mint and TechCircle in April echoed the same sentiment, stating that instead of investments being made in NFTs due to hype generated through celebrities, those buying or trading NFTs will focus on the real value of an NFT project.

The valuation of the entire NFT market, however, has continued to tumble through the year, as Bloomberg reported in March this year about crashing NFT sale volumes as well. Going forward, it remains to be seen if the NFT market continues to crash further, or shows signs of recovery with numerous gaming companies and social media platforms offering NFT adoption as added features on their platforms.