Non-fungible tokens (NFTs) have become the biggest trend in the crypto market, and this is fully supported by a detailed report released by NFT market NonFungible.com. The report looked back at 2021, a record year for NFTs and highlighted the industry’s massive growth.
We have broken down the report and highlighted the major trends you should know about the NFTs market.
Key moments in the NFT market in 2021
The report divided the growth of NFTs into four important periods.
At the start of 2021, the NFTs market hit the spotlight due to collaborations with sports brands. The most notable is the success of NBA Top Shot and Sorare – The french company that offers collectible football cards raised $50 million in February, then $680 million in September.
This period represented the phase when large scale sales of NFTs was observed. It also marked the advent of CryptoPunks or Bored Ape Yacht Club collectibles and some artistic NFTs collections like Beeple whose sale of ” Everyday’s – The First 5000 Days” for $69 million made the headlines in March 2021.
The summer of 2021 witnessed the continued boom of NFTs, with many artists jumping on the train. In August, more than $300 million worth of NFTs were traded in one week.
By Q4, 2021, NFTs were already mainstream and a mainstay in the crypto world. Its popularity was such that the Collins Dictionary named “NFT” as the word of the year.
NFTs growth shows no signs of slowing down
NFTs rise has been meteoric when compared to other disruptive technologies such as the electric car whose market doubled in 2021. NFTs are growing crazy, with the market rising by 21,350% in 2021.
The NFTs market performed 100 times better than the Electric car market and shows little signs of slowing down. Of the 71 million active Ethereum wallets, more than 2.5 million transacted NFTs in 2021, which represented an increase of 1,822%.
Unsurprisingly, there has also been an increase in buyers than sellers. Buyers increased from around 75,000 in 2020 to 2.3 million in 2021. Sellers from 31,700 in 2020 to 2.3 million in 2021.
The report also noted that the NFTs market generated over $5 billion in profits in 2021 and the profits are poorly distributed in the market. There were only 473 portfolios that generated at least one million dollars over the year.
Nonfungible.com produced a table that summarizes this growth between 2019 and 2021.
Key sub-sectors in the NFT markets
Non-fungible.com noted the different categories of NFTs that have emerged in popularity according to their total sales in dollars.
- Collectibles: $8.4 billion
- Video games: $5.18 billion
- Works of art: $2.80 billion
- NFTs dedicated to the metaverse: $513 million
- Utilities and finance NFTs: 503.84 million
NFTs still face challenges despite a record year
Despite the success of NFTs in 2021, the market still has some challenges its needs to overcome to ensure mainstream adoption. Some of which includes.
Improving user experience
Buying an NFT on decentralized marketplaces like OpenSea remains complex. Users have to download a crypto wallet, save private keys and load their wallet with supported tokens before making a purchase.
Although there are some easier platforms like Crypto.com or Binance NFTs, this comes with limitations as owners have limited control over their NFTs as they cannot sell them on another platform.
Clear legal framework and taxation
Many countries lack a clear legal and regulatory framework, and it remains complicated to declare income made from NFT sales.
Keeping NFTs authentic despite market volatility
The massive growth witnessed in the NFT market has led to many brands and stars jumping on the train leading to speculation and inflation of NFTs assets. As a result, the prices of certain collections have exploded and led to a trail of scam projects in the market.
The challenge for the NFT market is maintaining the sustainability and authenticity of collections to make them mainstream.
Educating newbies on best practices and risks
The sharp increase in the number of active wallets in the NFT market suggests that many are looking to leverage the growing popularity of NFTs. However, this does not mean that many understand how it works and the risks associated with holding digital assets.
The crypto community will have to educate newbies on the best practices and help reduce the risk of being scammed by malicious projects.