In the past few years, the NFT market has experienced extreme volatility, from initial explosive growth to the current sharp decline. In this market storm, the vast majority of NFT projects have failed to withstand the severe test of the market, leading to doubts about the long-term viability of this category of crypto assets.
At the first Global NFT Developer Summit 'NFTCON 2024' jointly initiated by PANews and NFTScan, PANews released the latest NFT industry report, which deeply analyzes the current development status of the NFT market and explores potential paths for sustainable development, helping everyone to comprehensively understand the complexity of the NFT market and gain insights into its possible future innovation paths.
Multiple Challenges and Market Changes for NFTs
Since entering 2024, the NFT market as a whole still faces many challenges and uncertainties. Although several key indicators indicate that the market is gradually stabilizing, the NFT landscape is also changing due to shifts in market demand, platform competition, and narrative trends, and its value system urgently requires new empowerment.
Sales decline, profits rise, and potential market demand growth
According to the latest data from CryptoSlam, as of November 6, NFT sales this year have approached the 7.43 billion USD mark, a decline of about 14.8% compared to the beginning of the year. In terms of average selling price, the average selling amount of NFTs this year is 119 USD, which has increased compared to last year, but still only about a quarter of the historical peak.
Although the overall sales of NFTs show a downward trend, the market profit is showing signs of recovery. As of now, the profits from NFT transactions in 2024 have exceeded 33.303 million USD, a sharp contrast to the nearly 250 million USD negative earnings encountered in 2023.
Moreover, the volume of wash trading in the NFT market has shown a significant decline trend, with this year's NFT wash trading volume only amounting to 2.32 billion USD, which is only about 8.5% of the total wash trading volume in 2022.
However, from the perspective of the buyer-seller market dynamics, the potential demand for NFTs continues to grow. This year, the number of independent NFT buyers reached 6.878 million, a historic high, significantly exceeding the number of independent sellers, which was 3.611 million.
Established projects facing cooling and narrative challenges
Unlike previous years, the NFT market in 2024 has yet to emerge with hot projects that can lead the market. More severely, the once-popular established NFT projects are now facing a collective chill, with many former star NFTs encountering a decline in value, and market enthusiasm and confidence gradually waning.
According to Dune's statistics at the beginning of this month, NFT projects have generally encountered significant declines in floor prices and transaction volumes. Even leading NFT projects such as CryptoPunks, Bored Ape Yacht Club (BAYC), and Azuki have not been spared, with their prices hitting historical lows in years.
At the same time, in terms of monthly transaction volume, projects that can exceed one million dollars are extremely rare, further highlighting the severe challenges and adjustment pressures currently faced by the NFT market.
At the same time, some of the popular narratives in the past NFT market (such as collectibles, art, metaverse, gaming, etc.) are also facing skepticism. The proliferation of low-quality and counterfeit items, valuation bubbles, and insufficient market liquidity have begun to reveal challenges to the actual value of some narratives.
Changes in the dominance of mainstream blockchains: Bitcoin surges, Ethereum cools down
In 2024, NFT sales are mainly concentrated on three mainstream blockchains: Bitcoin, Ethereum, and Solana, contributing a total of 6.53 billion USD, accounting for 87.9% of the overall market.
In this year, Bitcoin's sales performance was the most outstanding, reaching 2.77 billion USD, achieving a growth of 1.53 times compared to last year. Ethereum, while still dominating the NFT market with over 2.44 billion USD in trading volume, has seen a significant decline compared to previous years, only about one-tenth of its peak in 2022. Solana's performance remained relatively stable, with sales reaching 1.32 billion USD, showing slight annual growth.
Market Landscape of Trading Platforms: Magic Eden Grows Against the Trend
In the trading market, Blur, OpenSea, and Magic Eden are currently the mainstream trading markets.
Dune data shows that as of November 4, Blur accounts for 49% of the market share, ranking first; OpenSea follows closely with a market share of 29.2%; while Magic Eden ranks third with a market share of 5.4%.
It is worth noting that amid the overall market cooling this year, both Blur and OpenSea have seen declines in market share, while Magic Eden has shown strong growth momentum, with particularly outstanding market performance.
The complexity and uncertainty of regulation
The development of NFTs faces serious regulatory uncertainties, with significant differences in the definitions, classifications, and regulatory policies of NFTs across different regions, lacking a unified legal framework, especially in areas like intellectual property protection, consumer rights, and anti-money laundering, causing considerable confusion for market participants.
Innovative Paths for the Sustainable Development of NFTs
The sustainable development of NFTs requires not only innovation in traditional digital collectible attributes but also exploration of new paths to enhance asset liquidity and value conversion through integration across multiple fields such as DeFi, RWA, consumer applications, and public chains. Here are several possible breakthrough directions:
DeFi
NFTFi is the product of the deep integration of NFTs and DeFi financial paradigms, providing NFT holders with more financial tools and avenues for value enhancement, such as lending, staking, derivative trading, yield farming, liquidity pools, etc., broadening the application scenarios of NFTs, thereby greatly promoting the liquidity and price discovery of NFTs and achieving significant improvements in asset value.
For example, in financial derivatives and lending, NFTs can serve as collateral to provide users with lending services, and can also be used as financial derivatives to create various financial instruments and investment strategies based on NFT value. Items, characters, skins, etc. in GameFi games can be converted into NFTs, providing gamers with more sources of income and promoting the liquidity and value discovery of gaming assets.
Art/knowledge product NFTs combined with DeFi can enable pledge financing, providing holders with more liquidity, and DeFi can also be integrated with NFT insurance to provide insurance services for NFT assets.
RWA
The combination of NFTs and RWA (real-world assets) breaks the geographical and temporal limitations of traditional financial markets, allowing various real-world assets to be displayed and traded intuitively and conveniently in digital form on the blockchain. Through NFT tokenization, the transparency and efficiency of real asset trading have been significantly enhanced, greatly increasing asset liquidity, allowing investors to buy and sell assets more conveniently.
Moreover, the competitiveness and transparency of the NFT market help to form a more reasonable price discovery mechanism, enabling asset prices to more accurately reflect their true value, thereby providing investors with a fairer and more open trading environment.
For example, after the ownership or usage rights of real estate are converted into NFTs, buyers and sellers can easily conduct transactions through blockchain platforms. This method not only enhances asset liquidity but also reduces transaction costs and intermediary fees.
The digital ownership or partial rights of artworks, after being NFTized, can be transferred and traded through NFT trading platforms, providing new ways for the investment and trading of artworks, addressing trust issues and geographical limitations in the traditional art market. In supply chain management, by recording the identity information of various links and suppliers in the fields of luxury goods, agricultural products, etc., in NFTs, the source and quality of each product can be traced.
Certain financial assets (such as bonds, equity, fund shares, etc.) can also simplify the asset trading process after being converted into NFTs, enhancing the liquidity and transparency of traditional financial assets. In the insurance industry, digitizing insurance contracts or policies into NFTs allows clients to manage, trade, or transfer their insurance rights more conveniently, and improves the transparency of insurance contracts.
However, the application of NFTs in the RWA field not only needs to address legal and regulatory issues but also faces risks such as market acceptance and technological security, while providing innovative solutions for the management, trading, and financing of real-world assets.
Consumer Applications
As consumer demand for personalization, uniqueness, and virtual identity continues to rise, NFTs show great potential in the consumer application field, fundamentally redefining the interaction and value exchange logic between brands and consumers, effectively promoting the growth of the fan economy and driving the popularization of NFTs in the consumer sector.
Consumer applications of NFTs are not limited to digital art or rare items, but can also extend to digital identity, brand loyalty, membership benefits, gaming, virtual goods, and other products.
For example, Web2 brands like Nike and Adidas can use NFTs as substitutes for membership cards or loyalty points, allowing consumers to enjoy exclusive offers, events, and services through these NFTs, and even resale these NFTs in the secondary market. Users purchasing virtual land NFTs in Decentraland and The Sandbox can build, develop, rent, and sell their virtual stores, entertainment venues, museums, and other digital assets in the virtual world.
Platforms like Audius and Royal also allow NFTs to serve as proof of ownership for music and art works, providing creators with direct revenue, while consumers can own unique versions of music and enjoy future revenue sharing rights.
NFTs can serve as digital tickets for events, allowing consumers who purchase NFTs to gain access to concerts, sports events, art exhibitions, and more. This approach increases the authenticity and transparency of ticketing and provides consumers with a unique interactive experience.
Web2 consumer brands like Gucci, Balenciaga, and Rtfkt are starting to experiment with using NFTs to participate in virtual fashion and digital apparel events. Consumers can purchase limited edition virtual clothing, shoes, accessories, etc. through NFTs to showcase their personality and identity in the virtual world.
Social Networks
NFTs have great potential to reshape the interaction patterns of social media and social platforms, especially in terms of personalization and the construction of virtual identities.
For example, NFTs can serve as symbols of personal identity, representing users' unique achievements, preferences, and identities. Social platforms can integrate NFT markets, allowing users to buy and sell digital goods, artworks, or other NFT assets, enhancing interactivity and social experience within the platform.
NFTs also provide the foundation for decentralized social networks to achieve disintermediation and decentralized governance, allowing users to truly own and control their content creation and sharing while directly earning economic returns from platform activities.
Public Chains
From the current development status of NFTs on mainstream public chains like Ethereum and Bitcoin, high gas fees, strict limits on block size, slow confirmation speeds, and scalability bottlenecks all pose significant limitations on the widespread application of NFTs. To address these challenges, some projects are beginning to seek innovative paths such as cross-chain and L2.
For example, the rise of multi-chain ecosystems means that NFTs are no longer constrained by a single public chain. By breaking down the barriers between chains, a more efficient asset transfer and trading environment can be achieved, injecting new vitality into the liquidity and popularization of NFTs. L2 solutions play an important role in expanding the trading processing capacity of NFTs and reducing high transaction costs, allowing more users to afford NFT trading and creation.
In addition, emerging public chains such as Polygon and Solana, with their advanced architectural design and innovative consensus mechanisms, are continuously optimizing the trading speed and security of NFTs, providing users with a smoother, safer, and more efficient NFT experience.
Conclusion
NFTs need to evolve from being mere digital collectibles to a more diverse, liquid, and market-potential asset class. The key is to fully retain and enhance their unique cultural connotation and personalized social identity attributes. At the same time, the NFT market must actively seek integration with a broader range of asset classes and application scenarios.
This not only helps to enhance the practicality and investment value of NFTs but also promotes their recognition and popularization in a broader range of application scenarios, thereby opening up new growth spaces.
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