No sign of the bubble bursting: NFT market set to double by October
- The NFT trading volume looks set to reach $175 million by October
- The total value of the NFT trading volume rose by 645% between January and March 2021
- Invezz predicts the market cap of NFTs will increase from $338 million in 2020 to $470 million in 2021
The market for non-fungible tokens (NFTs) experienced rapid growth in early 2021, both in total value of sales and generation of public interest. What caused the bubble, and has it already burst?
Non-fungible tokens (NFTs) have been around since the mid-2010s but it wasn’t until 2017 that the industry caught people’s attention. A new game called CryptoKitties was launched in which people could buy, collect, and even breed digital cats. Fast forward to 2021 and the NFT market evolved to include multi-million dollar digital assets.
Why have NFTs exploded in popularity this year?
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Building off momentum from CryptoKitties craze in 2017, the NFT market tripled in size in 2020. But the first few months of 2021 was unlike any previously seen period as the NFT market smashed all previous records. Most notably, a bidding war broke out for Twitter and Square CEO Jack Dorsey’s first ever tweet with the winner owning an NFT version of the tweet along with a virtual autograph.
Dorsey’s tweet sale pales in comparison to the record-breaking $69.3 million that crypto investor Vignesh Sundaresan paid for a single work by digital artist Beeble.
These two high-profiled transactions certainly piqued public interest, with Google Trends data showing relative all-time popularity for the search term ‘non-fungible token’ rising from 0 in November and December to 30 in February and 100 in March.
According to data from coinranking.com, the total trading volume for NFTs rose from $11.5 million in January to $33.8 million in February, before rocketing to $86 million in March.
Is this a bubble that’s going to burst?
Is the NFT market a giant bubble set to burst? The answer depends who you ask. The total trade volume of NFTs dipped to $68 million in April, leading some to conclude that the bubble was already bursting. Some feel that the price rise is pure tech speculation with little value or utility behind the products being sold. Some analysts say a market correction was inevitable following the boom in March.
On the other hand, it’s far too early to conclude if the April data shows that interest has totally cooled. One month’s worth of data is hardly indicative of any longer-term trends.
Will people keep buying NFTs?
Based on current growth trends, Invezz analysts have used a linear regression method to predict a steady increase in the total trade volume of NFTs over the next six months, rising to $125.9 million in July and $175.2 million in October.
Meanwhile, Invezz predicts the market capitalisation of NFTs will increase from $338 million in 2020 to $470 million in 2021. Invezz Lead Editor Jayson Derrick is convinced the NFT market has a clear catalyst for growth in the near-term and longer-term.
In recent weeks we have seen the NFT market expand to include official blockchain-based versions of collectable cards from Major League Baseball in the US and some of the biggest football clubs in the world, including Liverpool and Real Madrid. While there are rumours that the social media giant, Instagram, is going to launch its own NFT platform in the near future as well.
On the high-end of the NFT spectrum we have seen NFT projects sell for tens of millions of dollars at Christie’s auctions. It may be a matter of time before billionaire investors with deep pockets spend $100 million on an NFT project, perhaps leading to even greater interest and curiosity among the general public.
“While no prediction models are perfect, it is clear the NFT industry can benefit from a multi-year growth trajectory despite April’s decline. We expect maybe a further drop to take place in May, but then a continued rise from June & July before reaching the October prediction,” Derrick said.
Should I be buying NFTs?
As with many investments involving blockchain technology, those without good knowledge of the field risk falling victim to scams or struggling with compatibility across marketplaces, so extensive research in understanding what is for sale is required.
Buying NFTs as an investment is still a new concept while some in the art world have said there is a huge long-term opportunity in NFTs. CoinDesk Research Managing Director Noelle Acheson told Business Insider:
“The NFT craze is not so much about prices and quick profit as it is about a new model of creative monetisation.”
Buying NFTs as a hobby is a safe option if it is acquired via a reputable marketplace.
Derrick further notes:
“The NFT market is well positioned to address demand at all price points so there will certainly be something for everyone.”
That market looks like it’s resistant to the forces that have caused a correction in the price of cryptocurrencies like Bitcoin and Ethereum in recent times. Thanks to its unique combination of innovative technology and creative freedom, the demand for NFTs shows no signs of slowing down.