Are you considering investing in NFTs? Wondering where the NFT market is going this year? Click here to learn some of the basics. NFT sales reached a total volume of $24.9 billion in 2021. This is up from just $94.9 million in 2020.
The NFT market is growing incredibly fast, and it doesn’t seem like it will slow down any time soon. If you have an interest in NFTs and want to make the most out of the space, understanding the market and where it is going is essential.
For a rundown of the current market and where it is likely to go in 2022, keep reading.
What Are NFTs?
NFTs (Non-fungible Tokens) are assets that can be bought or sold and are mostly traded on blockchains. “Non-fungible” means that any NFT is unique and cannot be replicated.
NFTs are most prominent on the Ethereum (ETH) blockchain, but also exist on others such as Solana (SOL) and Avalanche (AVAX). By using the respective cryptocurrency, you can buy NFTs and either hold onto them or sell them on.
Many people collect NFTs with the hopes that they will increase in value so that they can sell them for a profit, not unlike trading stocks.
Current NFT Market
The first NFT was minted and sold in 2014 at a time when almost no one had ever heard the term. It took a while for NTFs to gain any real traction, but the NFT marketplace has seen massive growth in recent years.
For reference, the global sales of NFTs in Q1 2021 was $1.2 billion, and in Q4 2021, this figure reached $11.6 billion. While the majority of NFTs are under $1,000, some sales have been in the millions. The most expensive purchase to date was for a piece called “The Merge,” which sold for $91.8 million in December 2021.
The explosive growth of cryptocurrencies and the NFT market came as a surprise to many. This was largely due to a lack of understanding from most people.
As these markets have grown, so too has the number of people interested, and the overall understanding of crypto, NFTs, blockchains, and more. There are various categories of NFTs depending on their uses and why people invest in them.
Around 94% of current NFT owners and 42% of non-owners intend to purchase NFTs during 2022.
NFTs fall into two main categories – physical and digital.
Physical NFTs are most often works of art that people trade on the blockchain in the same way as digital NFTs. Owners can then have the physical artwork delivered, with an IPFS link authenticating the piece.
Far more common are digital NFTs which are completely stored on the blockchain. Buyers can mint these from the creators, and then trade them through various secondary marketplaces.
Some NFTs are one-off pieces, or they are sometimes made as collections. These NFTs are often more than just art and usually come with additional features that add to their value.
The applications of NFTs exist in several segments:
The most popular segment in terms of revenue is collectibles. These have become very popular as a status symbol, and have been known to increase in value greatly in short periods of time. Bored Ape Yacht Club NFTs, for example, had a mint price of 0.08 ETH ($190) when they minted in April, and are now worth hundreds of thousands of dollars.
Blockchain gaming is one of the fastest-growing trends, with play-to-earn games seeing a huge rise in popularity in the year. Some of these games use NFTs as in-game avatars, or for certain features within these games.
The end uses of NFTs will more than likely have a huge impact on the market in the near future. One such usage is for supply chain and logistic purposes.
NFTs can authenticate products and validate the source, as well as ensure quality. As details of NFTs cannot be altered, and are openly available for anyone to see, verifying authenticity is simple and efficient.
The transparency and immutability of NFTs also make them ideal for logistics. This has not resulted in very wide use yet but will grow as time goes by as it can help validate the legitimacy and reliability of supply chain sources.
Different regions have seen different trends with regards to NFTs, with North America having the largest growth in 2021, during which 73% of NFT owners made their first purchase. This will most likely be the case in the coming years as well.
The number of digital artists in the US and Canada is increasing, along with the number of buyers and collectors. While growth in North America is likely to be the largest, other regions are similarly expected to grow throughout 2022.
One of the most significant reasons for the growth in the popularity of NFTs is the Metaverse. The Metaverse refers to a virtual world that can be accessed through digital devices. This is most often done using computers or virtual reality headsets.
You can enter the metaverse now, and even purchase a metaverse NFT to utilize within the virtual space. A typical example is a metaverse avatar, which is an NFT that you can use to represent yourself within the metaverse.
The Sandbox is one such popular world, where users can purchase land and interact with other users. People can also create items and monetize them to earn real-world money while playing.
Anyone can create, upload, publish, and sell a sandbox NFT, and this is leading to rapid growth in the space. The amount of space is limited, which helps maintain value.
Decentraland is the main competitor to Sandbox, with Upland as another upcoming virtual world. Further worlds could also be released in the future that could surpass all of these.
Will NFTs Surpass Bitcoin?
Within the world of blockchains, Bitcoin has always dominated as the largest market, but some believe that NFTs could change this. This is mostly down to the fact that NFTs can verify the authenticity of assets, which could be used for expensive real-world items such as luxury watches or cars.
This could also prove very useful for real estate transfer taxes and insurance policies. NFTs, therefore, do have the potential to cover a much larger market than Bitcoin or other cryptocurrencies.
At this point, it is hard to be certain about such predictions, but the possibility is most definitely there.
The NFT Market in 2022
The way that the cryptocurrency and NFT market has gone in recent years makes it clear that precise predictions are very difficult to make. With that being said, the growth is clear, and there is no reason that this wouldn’t continue into 2022 and further on.
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