Author : Mark
Date : Jan 03,2023
Following a solid performance in 2021, 2022 got off to a strong start and kept it up for the first half of the yea
The web 3.0 ecosystem has repeatedly shown that predictions and projections are only occasionally certain to come true. Furthermore, it's not always possible to forecast if this year's success will continue into the following one. Web 3.0 is still in its infancy, but it already has a big impact on world economies.
NFTs, or non-fungible tokens, are one of the most well-known applications of web 3.0. It is incredible that hardly anyone was aware of NFTs or their capabilities three years ago. Despite the widespread celebrity adoption, many individuals continued to dismiss NFTs as nothing more than JPEGs or an overrated technology. NFTs, however, have shown to be more than that, and this year they went one step further.
NFTs' rally this year was among the best ever seen in the area. Following a solid performance in 2021, 2022 got off to a strong start and kept it up for the first half of the year. The NFT community received financing at that time, and the technology gradually filtered into important areas of the global economy like sports, gaming, and entertainment.
It was a golden opportunity for businesses and celebrities to participate in what many see as the future. With varied degrees of success, well-known companies including Nike, Instagram, Reddit, and Starbucks entered the NFT market. Celebrities entered the NFT market after missing the chance in 2021. It was a question of what could be done with the technology for veterans like Snoop Dogg. When the rapper and Eminem launched the Bored Ape Yacht Club NFTs in their music video, we got a glimpse of that. It was the first of its kind and portended more to come.
NFT, more than anything else, increased public awareness of cryptocurrencies in general. Users who wanted to purchase an NFT first had to become familiar with cryptocurrencies and how they operated. Additionally, consumers had to comprehend the underlying technology of blockchain as well as what makes one blockchain unique from another. After all, many people chose to use the space to invest or flip things for a profit. They should naturally want to know which blockchain or platform benefits them more.
However, the success tales were transient. Extreme volatility, decreased user engagement, and trading volume have all been present in the NFT ecosystem since the beginning of the second half of this year. Are NFTs at fault? No. However, because the crypto world is interconnected, people frequently mistakenly see any threat in one area of the industry as a threat to all. Trade volumes and user mood in the greater crypto market were affected by a number of institutional crashes. It became clear that users are being more frugal with their money than they were in 2021.
Here is the NFT market report for 2022 without further ado.
Performance of the NFT market in 2022's first quarter
A mixed performance marked the beginning of the year 2022. The surging results seen in Q3 2021 fizzled down, and the market as a whole took a break. A slowdown was anticipated because various media sources predicted that the NFT bubble might pop in Q1 2022.
Less NFT speculation and increased stability were the outcomes, which benefited the market. The proportion of repeat purchases that were losses decreased as well. However, the decline generated conflicting reactions from those who believed the top performances of 2021 would continue. Based on the criteria taken into account, there were a lot more short-term resellers. Although Q1 2022 got off to a poor start, it ended with the biggest trade volume ever seen in a quarter. NFT collectibles had a successful run and a rise in trade activity. In addition, the selling of a CryptoPunk four years after the seller acquired it yielded the highest profit margin.
Highest market capitalisation ever achieved by NFT Market
Following the sharp rise in cryptocurrency prices, which made many NFTs expensive, the NFT market lost momentum. NonFungible data shows that between Q4 2021 and Q1 2022, the price of NFTs climbed by over 80%.
The pace of new ventures entering the market decreased. Users concentrated on well-liked projects that were already in circulation. Blue-chip NFTs saw a rise in trade volume and attention, like Bored Ape Yacht Club. The NFT market's overall sales fell by roughly 50%.
Trade volumes on the primary market decreased as a result of a delay in the release of fresh assets onto the market. However, the secondary market, which accounted for around 70% of the sales volume, had a successful run. The decrease in primary sales indicated that the excitement surrounding new NFTs has subsided compared to 2021, when the secondary market accounted for 47% of purchases.
Additionally, fewer active wallet addresses were used. This was most likely brought on by NFTs' high cost, which was unaffordable for the typical user. Additionally, the market partially stabilized, forcing short-term sellers who were counting on price pumps to make a profit to sell at a loss. According to NonFungible data, there are 150,000 active wallets every week. The information indicates that there were significantly less active consumers in the NFT market in comparison to 280,000 in October and 380,000 in November.
The market is dominated by Yuga Labs.
CryptoPunks and Meebits were acquired by Yuga Labs, the firm that created the popular NFT collections Bored Ape Yacht Club (BAYC) and Mutant Ape Yacht Club (MAYC). One of the first PFP (profile photographs) and a top-performing NFT collection in terms of trading volume and sales was CryptoPunks. Yuga Labs became the well-known brand for NFT collectibles with the purchase of CryptoPunks, in addition to the BAYC and MAYC collections.
DappRadar reports that Yuga Labs purchased from Larva Labs 1,711 Meebits and 423 CryptoPunks. Meebits was selling for around $16,000 at the time, whereas CryptoPunks had an average price of $177,000 at the time. Although the deal's specifics were kept confidential, DappRadar believes it might be worth up to $100 million.
In the NFT market, collector NFTs are the main attraction.
For the quarter, the NFT market's leading segments were NFT collectibles. The majority of the recorded trading and sales volume was made up of collectibles. After months of lagging behind, BAYC ultimately overtook CryptoPunks as the NFT market's most active project.
In the first quarter of 2022, the Yuga Labs superstar collection made $1.2 billion. New project Azuki finished in second, while CryptoPunks, the previous market leader, came in third. With profits of $500 million in the first quarter, BAYC exceeded profits. With $90 million in losses, the collection yet also had the largest profits.
In Q1 2022, many NFT investors sold their gains. The sales of collectibles and PFPs hit a peak profit of $268 million in February, driven by speculative trading. Additionally, the NFT market reported its most lucrative sale ever. After more than four years, the owner of CryptoPunk #5822 sold the NFT for a profit of over $23 million.
The NFT markets' gaming sector has trouble reaching significant trade volumes. Instead, the segment experienced weekly losses of almost $14 million. As interest in collectibles increased, many NFT game traders were forced to resale at a loss.
However, despite being quiet, art NFTs had a stable run. With weekly resales bringing in close to $28 million, resellers had a successful quarter. Despite having minimal resale losses, the metaverse phase lingered on.
Performance of NFT market in second quarter of 2022
More trade and sales volume reductions were observed in the second quarter of 2022 compared to the first. The bear market that began in the second quarter was to blame for this fall. As a result, the value of both NFTs and cryptocurrencies decreased.
The success of NFT was impacted by the conflict in Ukraine as well as other macroeconomic elements of the global and crypto economies. The Terra Luna crash, which destroyed $17 billion in market value, is significant. Although the stablecoin isn't directly used in NFT trading, its collapse nonetheless caused a liquidity shortage.
Both private collectors and institutional investors refrained from investing. Most NFT resales resulted in losses with scant profits.
NFT Market experiences a liquidity crisis.
The NFT market entered a bear market further. The bear market that would dominate the rest of 2022 began in this quarter. The decline was mostly brought on by the decline in the value of cryptocurrencies. After Terra Luna's demise, investors and users started to steer clear of risky investments. The most popular cryptocurrency for NFT trading, ether, saw a 66% decline in value between April and June.
The prices of the top ten NFTs reached an all-time high in May, according to Nansen's Blue Chip-10, an indicator that analyzes the ten largest collections by market capitalization. Additionally, according to NonFungible data, the number of NFT sales decreased from over 12 million in the first quarter to 10 million in the second.
Resale profits decreased significantly by 50%, from $3.5 billion to around $1.8 billion in volume. In the second quarter, secondary sales volume decreased from its first-quarter performance and made up just 48% of all sales.
During the quarter, project declines accelerated the primary market, though. The number of sales increased and reached its peak in June at 600,000. That demonstrated that fresh projects were launched into the market by creators at fairly affordable pricing.
The spotlight is on Metaverse thanks to OtherSide Launch.
The eagerly awaited video game Metaverse OtherSide was released by Yuga Labs. One of the biggest launches of the year, with main sales of the company exceeding $300 million. The 24 hour trading on OpenSea was broken by resales of the NFT on secondary markets.
The launch alone increased awareness of Metaverse NFTs. As a result, after a quiet Q1 2022 and Q4 2022, Metaverse NFTs performed well. Yuga Labs has four collections on the top five NFTs by trading volume at the conclusion of the quarter: BAYC, CryptoPunks, MAYC, and OtherSide.
Trades on NFT Collectibles decreased
NFT collectibles saw a decline in trading activity as investors shunned hazardous investments. Due to a lack of liquidity, customers opted to hang onto their money rather than invest it in cryptocurrencies or NFTs. As a result, the quarter's performance was uneven.
Collectibles experienced the largest drop of any NFT segment throughout the quarter. NFTs in the gaming industry kept declining from the previous quarter. The OtherSide 100,000 NFT plots, on the other hand, led to a nearly 25% rise in Metaverse NFTs. Utility NFT also had a successful quarter, increasing by 40% from the beginning to the end of the period.
Yuga Labs had another successful quarter to end the year. Two of its collections, BAYC and OtherSide, generated a transaction volume of $2 billion. 30% of the trading volume reported in the entire NFT market during Q2 2022 was created by Yuga Labs collections when combined with the trade volume of CryptoPunks and MAYC.
NFT market activity in the third quarter of 2022
More erratic falls occurred in the third quarter of 2022, which raised market anxiety. These institutional failures caused the market to fall even lower into a bear market with no prospect of a quick recovery. Despite the downturn in liquidity, a number of attractive startups with fresh applications and use cases emerged.
On the negative side, the FTX crash made the market's gloomy situation much worse. Additionally, it increased regulatory oversight of digital assets as nations worked to safeguard their citizens.
NFT market activity in the fourth quarter of 2022
After two tumultuous quarters, NFT market activity steadied in the last quarter of 2022. The trading volumes have decreased since their high in January, and user activity has not yet increased.
The market saw the emergence of new projects and collections, and the number of new NFT markets increased, putting OpenSea's hegemony in jeopardy. In terms of metaverse NFTs and NFT collectibles, Yuga Labs came to an end of the quarter in the first position.