2022 Q3 NFT Report: Insights into the Next Trends of the NFT Market from 6 Hot Areas
In contrast, the impact on the NFT market is not as significant as people imagine, and it has withstood the blows of the bear market, with a promising future ahead.Written by: Sara Gherghelas, DappRader
Compiled by: Moni, Odaily Planet Daily
In the third quarter of 2022, the entire cryptocurrency industry fell into a trough, revealing a series of issues such as intensified market competition, a decrease in the number of new buyers and sellers, and rising fraud risks. Meanwhile, NFTs seemed to withstand the bear market's decline, as multinational companies like Starbucks entered the space, injecting new vitality into this emerging field. Let's explore the dynamics of the NFT market during this period through this latest report.
Q3 NFT Industry Overview
By the end of the first quarter of 2022, the total trading volume of NFTs exceeded $12 billion, with sales reaching 28 million transactions. However, entering the second quarter, the NFT market's trading volume dropped by 33% ($8 billion) and sales volume fell by 29% (20.23 million transactions) due to a series of events such as the collapse of the Terra ecosystem and subsequent CeFi liquidations. The high economic uncertainty and crypto events experienced in the second quarter led to a dramatic decline in NFT trading volume in the third quarter (only generating $2.5 billion). Nevertheless, market demand remained stable; even with the sharp decline in NFT trading volume, the number of independent NFT traders (over 2.2 million) remained above the baseline, and importantly, this metric grew by 36% compared to the third quarter of last year.
While investors with large portfolios (often referred to as "whales") continue to drive NFT sales, the increase in new buyers indicates that many people are still curious about NFTs and wish to invest more in this asset class.
We have reason to believe that, similar to artworks, NFTs can also become an asset class that correctly stores value. Since the collapse of Terra in May, even during the bear market, the dollar market value of the top 100 Ethereum-based NFT collections has only dropped by 50%.
Next, let's delve into the status and subsequent trends in this field by analyzing some blue-chip projects within the NFT category.
1. Digital Collectible NFTs
Undoubtedly, digital collectibles still dominate the NFT market to a large extent. In the first quarter of 2022, the total trading volume of NFT digital collectibles exceeded $9 billion. In the second quarter, it dropped by 49.5% to $5 billion, and in the third quarter, it further plummeted by 84% to $713 million, marking the lowest quarterly figure since the first quarter of 2021. Notably, 52% of NFT digital collectibles are PFP (Profile Picture) avatars.
In terms of public chains, Ethereum remains the blockchain network generating the most NFT trading volume, providing significant support for the most valuable NFT assets and innovative markets and aggregators (such as OpenSea, X2Y2, Gem, etc.). In the third quarter, Ethereum's NFT trading volume accounted for 91% ($645 million) of the total NFT trading volume across the network.
Compared to the third quarter of 2021, trading volume in the third quarter of 2022 dropped by 93%, but CryptoPunk #5822 stood out during this period with a record sale of 8,000 ETH (approximately $23.7 million), marking the largest transaction in the history of CryptoPunks NFTs, purchased by Chain CEO Deepak Thapliyal (Deepak.eth).
Additionally, the NFT trading volume on the Flow blockchain accounted for 2.54%, while the Ronin blockchain accounted for 2.53%. Notably, the total NFT trading volume on ImmutableX increased by 87% compared to the previous quarter, making it the only blockchain to show positive growth in NFT trading volume this year.
From the on-chain sales volume in the third quarter of 2022, the situation appears different. Ethereum remains the dominant chain but only accounts for 26.22% of total sales volume. The significant difference between trading volume and sales volume indicates that Ethereum may attract more "high-end whale buyers," while other blockchains are favored by small and medium traders.
On the other hand, thanks to providing rich scaling solutions for Web3 games and GameFi DApps, ImmutableX's NFT trading volume accounted for 23.12%, and Ronin's NFT trading volume accounted for 18.81%, establishing themselves as major markets for NFT trading.
2. Blue-Chip NFTs
Among the top 11 NFT projects (as shown below), Yuga Labs owns four projects: CryptoPunks, Bored Ape Yacht Club (BAYC), Otherdeeds for Otherside, and Mutant Ape Yacht Club (MAYC), which generated over $237 million in trading volume in the second quarter. However, in the third quarter, the trading volume of the top 11 blue-chip NFT series dropped by 88%, just exceeding $334 million, which is similar to the second quarter of 2021.
In fact, if we break it down by month, we find that the trading volume of blue-chip NFTs in June was $203 million, plummeting by 83% from May's $1.2 billion, likely due to market liquidity tightening triggered by the Terra collapse. However, even with the total trading volume declining, the floor prices of the top 11 blue-chip NFT series did not drop significantly, remaining roughly the same as before the Terra collapse.
However, among the four NFT projects owned by Yuga Labs, only the MAYC floor price (14.30 ETH) increased by 2.14% compared to August, while the other three projects saw declines. Compared to August, CryptoPunks dropped by 5.19% (63.95 ETH), BAYC dropped by 7.36% (73 ETH), and Otherdeed had a smaller decline of 0.57%.
Since these NFTs not only represent digital collectibles but also symbolize access passes to individual identities, the "average holding period" metric becomes particularly important. In this regard, CryptoPunks ranks first with an "average holding period" of 239 days, followed by BAYC at 129.8 days, while MAYC and Otherdeed have similar average holding periods of approximately 96.9 days. Additionally, Azuki has the lowest "average holding period" metric, indicating that Azuki NFTs may be viewed more as investment tools rather than "loyal" collectibles held long-term by owners.
3. Digital Art NFTs
Since January 2021, digital art NFTs have seen over 4.5 million sales, with a total trading volume exceeding $3 billion. It is said that collectors turned to the digital art market during the COVID-19 pandemic due to difficulties in purchasing physical artworks, with artists like Beeple, Pak, Fewocious, and others being major contributors to this market, helping to bring NFTs to the mainstream.
In Q1 2022, the total trading volume of digital art NFTs exceeded $300 million, with sales reaching 666,000 transactions. However, entering Q2, the overall trading volume plummeted by 30% to $215 million, with sales also declining by 32%. The third quarter performed even worse, with an overall trading volume of only $59 million, a 72% decrease quarter-over-quarter, and sales volume dropping by 43% to 258,000 transactions.
However, there were some highlights in the digital art NFT field during the third quarter, such as the Museum of Modern Art (MoMA) in New York considering spending $70 million to acquire NFT-related artworks.
4. Game NFTs
GameFi is valued at over $8.6 billion, with 847,000 unique active wallets (UAW) registered in August, expected to grow exponentially in the coming years. Many popular blockchain-based games, such as Axie Infinity, Gods Unchained, and Aavegotchi, use NFTs for interactions, and major gaming companies like Ubisoft have also incorporated NFTs into their game designs.
However, not all traditional gaming communities welcome NFTs; for instance, EA Games, Mojang Studios, and Team have announced they will no longer use NFTs in their games.
In Q1 2022, the total trading volume of game NFTs exceeded $1 billion, dropping by 53% in Q2, and further plummeting to $71 million in Q3, a staggering 84% decline. In terms of sales volume, the market trend is similarly bleak: in Q1 2022, sales volume of game NFTs approached 12 million transactions, dropping to 6 million in Q2, a 50% decline, and further decreasing to only 3.3 million transactions in Q3.
According to data from game-related public chains (as shown below), 40% of blockchain gaming activity occurs on the Wax blockchain, with daily unique active wallet registrations on the WAX chain declining by 8% in August. Hive is the second-largest gaming blockchain, with daily unique active wallet registrations increasing by 12% in August, reaching 169,043. BNB Chain also saw growth, with daily unique active wallet registrations increasing by 8% month-over-month, exceeding 92,000, while Solana's daily unique active wallet registrations increased by 21%.
It is important to note that despite the significant decline in total trading volume and sales of blockchain game NFTs, they still attracted over $4 billion in investment.
5. Fashion and Luxury NFTs
The first NFT "experiment" in the fashion industry occurred in the footwear market when RTFKT Studios launched their own brand of virtual sneakers, and luxury giant Gucci released a virtual shoe called "Gucci Virtual 22." This trend has even extended to gaming platforms, with League of Legends announcing a collaboration with Louis Vuitton, and British fashion giant Burberry launching wearable NFTs in partnership with the Web3 gaming platform Blankos.
In Q1 2022, the total trading volume of fashion NFTs exceeded $16 million, dropping to just above $15 million in Q2, but sharply declining after May, with total trading volume in August falling below $1 million, and a staggering 89% decline in Q3.
However, there were some highlights in the fashion NFT market during the third quarter, such as Tiffany & Co's launch of the 250-piece "NFTiff" collection themed around CryptoPunks, generating $12.5 million in revenue.
6. Sports NFTs
Led by Sorare and NBA Top Shot, sports NFTs generated $128 million from over 4 million transactions in Q1 2022. However, following industry trends, the second quarter saw NFT trading volume plummet by 63%, while sales volume decreased by 54%. In Q3, the total trading volume of sports NFTs exceeded $18 million, a 61% decline from the previous quarter, with sales volume only around 1 million transactions, down 47% from Q2.
Despite this, the sports sector is expected to become one of the most active NFT vertical markets, with Sorare likely to benefit from the World Cup hype, and Flow chain NFTs showing steady development due to collaborations with the NBA and NFL.
Conclusion
While no one can accurately predict the future of the global cryptocurrency market, NFTs are attracting a broader range of market participants, with blockchains like Solana, Flow, and Tezos driving the adoption of emerging blockchain technologies in industries such as gaming and entertainment.
It is worth noting that many brands are beginning to actively adopt NFT technology. Ticketmaster has just partnered with Flow to integrate NFTs into its ticketing business; Starbucks has also announced the launch of "Starbucks Odyssey," which combines the Starbucks Rewards loyalty program with an NFT platform, allowing customers to earn and purchase digital assets to unlock exclusive experiences and rewards, such as benefits or free drinks, aiming to provide loyal customers with broader rewards while building a more engaged community.
Frankly, it is challenging for the NFT market in 2022 to recreate the glory of $25 billion in sales seen in 2021, especially with factors affecting the market such as the Federal Reserve's interest rate hikes and inflation uncertainty, leading to significant volatility in both crypto and traditional financial markets. However, in contrast, the NFT market has not been as severely impacted as many imagined and has withstood the blows of the bear market, with a promising future ahead.
