Sales of nonfungible tokens jumped to more than $17 billion in 2021, according to a new report from NFT data company Nonfungible.com.
The study, developed with BNP Paribas-owned research firm L’Atelier, said trading in NFTs hit $17.6 billion last year, reflecting an eye-watering 21,000% surge from 2020’s total of $82 million.
NFTs are tradable assets that keep track of who owns a certain digital item — say, a work of art, or video game avatar — on the blockchain. They entered mainstream consciousness in a big way last year.
A token representing a collage by the digital artist Beeple sold for a record $69 million at a Christie’s auction, while popular collections like the Bored Ape Yacht Club have lured celebrity buyers from Jimmy Fallon to Snoop Dogg.
“We’ve seen exponential growth over the past year,” Gauthier Zuppinger, co-founder of Nonfungible.com, told CNBC.
Nonfungible.com’s number for total NFT transactions in 2021 is lower than some other estimates. An earlier projection from blockchain analysis firm Chainalysis put the figure at more than $40 billion.
Zuppinger says this is down to the company’s own methodology for measuring legitimate volumes of NFT trades. The Nonfungible.com data rules out transactions involving bots and wash trading, a practice where investors simultaneously buy and sell an asset to artificially inflate market activity.
While proponents believe NFTs to be a valuable way of proving ownership of digital content, critics say the market has attracted predatory behavior. Participants are often encouraged to speculate on prices, and there’s evidence emerging of their growing use for money laundering and other nefarious activities.
Shift to the ‘metaverse’
More than 2.5 million crypto wallets belonged to people holding or trading NFTs in 2021, according to Nonfungible.com’s research, up from just 89,000 a year earlier. The number of buyers rose to 2.3 million from 75,000.
People also got better at making money from NFTs, according to the report, with investors generating a total of $5.4 billion in profits from sales of NFTs last year. Over 470 wallets managed to make profits in excess of $1 million, Nonfungible.com said.
The most popular category of NFTs was collectibles, which accounted for $8.4 billion worth of sales. Gaming NFTs such as Axie Infinity represented the second-largest category, racking up $5.2 billion in sales.
There was also a shift in focus later in the year to the so-called metaverse, with sales of digital land and other projects in the space reaching $514 million.
Hype around the metaverse — proposed shared spaces in which users can interact with virtual objects and each other — gathered steam after Facebook’s rebrand to Meta and Nike’s purchase of RTFKT, which makes virtual sneakers.
What next?
Going forward, Zuppinger doesn’t expect the overall value of NFT transactions to rise as dramatically this year. Volumes have averaged around $687 million per week so far in 2022, he said, slightly up from an average of $620 million a week in the fourth quarter of 2021.
“What is interesting is that we are seeing less people, less buyers, less sales,” Zuppinger said.
“The global community may have decreased because of speculation and a loss of interest in collectibles. But the global market is still really high and the value of some of these assets has continued to increase.”
Zuppinger predicts more large companies and financial institutions will enter the market, while more speculative assets start to disappear. A number of big brands, including Visa and Nike, jumped on the NFT bandwagon in 2021.