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Is the Revival of NFTs in 2024 a Reality, or Just Another Fairy Tale for Beginners?by@diadkov
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1,484 reads

Is the Revival of NFTs in 2024 a Reality, or Just Another Fairy Tale for Beginners?

by Matvii DiadkovMarch 25th, 2024
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NFTs, after a massive boom in 2021 and a significant crash in 2022, showed signs of revival in late 2023 thanks to a bullish crypto market and innovations like Bitcoin Ordinals and Solana's growth. With a more mature and diverse market, increased utility across various sectors, and positive market sentiment, NFTs are poised for a potential recovery in 2024. Challenges like scams and regulatory issues remain, but the outlook is optimistic for NFTs to find broader adoption and utility beyond just collectibles.
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The NFT world has made millions for lots of investors, while at the same time, it has bankrupted just as many people. There are rumors that NFTs will make a big comeback in 2024 and grab the headlines again. But is that really true? Can we trust these rumors? To find out, we will return to the very beginning - to the peak of NFTs in 2021, we will try to understand the reasons for the collapse of the market in 2022, its gradual recovery in 2023, and give a forecast for the current year.


Main Takes:

  1. 2021 Historical Context: NFTs experienced a significant surge in 2021, with trading volumes reaching $17.6 billion, driven by unique blockchain technology, the crypto bull run, the COVID-19 pandemic, the decline in ICOs, network effects, and FOMO.
  2. 2022 Market Correction: A dramatic correction occurred in 2022, with trading volumes and NFT prices plummeting due to a broader crypto market downturn, highlighted by events such as the collapse of TerraUSD and the bankruptcy of major crypto players.
  3. 2023 Revival Signs: Despite a sluggish start, the NFT market showed signs of revival in the last quarter of 2023, buoyed by a bullish crypto market and the SEC's approval of Bitcoin ETFs, with weekly trading volumes surpassing $500 million in December.
  4. Bitcoin Ordinals and Solana's Influence: The introduction of Bitcoin Ordinals and the growth of Solana contributed to the renewed interest in NFTs, offering unique features and security advantages.
  5. 2024 Outlook: Positive expectations for the NFT market are supported by a more mature and diverse sector, the broader crypto market's performance, utility in various niches, and mainstream adoption by traditional brands. However, challenges such as wash trading, scams, and regulatory fragmentation remain.

Why there was an NFT boom in 2021?

In 2021, the NFT market experienced an unprecedented surge. At that time, many thought that the interest in non-fungible tokens was confined to a relatively closed group of traders who had little connection to the art world. Soon, auction houses began to offer more NFT sales and create infrastructure and consistent offerings of this kind.


Research shows an explosion of interest in NFTs as a new asset class, with sales reaching $17.6 billion in 2021. Famous NFTs, like the ones from Beeple, Bored Ape Yacht Club, and CryptoPunks, became iconic. Even big brands like Gucci and D&G joined in, making their own collectibles.


In 2022, the NFT market faced a serious disruption, leaving everyone reeling. The once bustling market took a nosedive in prices, sparking widespread concerns and discussions about its future.

NFT crash in 2022

In June 2022, we witnessed a 12-month low. Sales fell to 1 billion dollars, the worst market performance since June 2021 (when sales were a modest 648 million dollars). According to Chainanalisys, while the market was worth 3 trillion dollars in November 2021, it's now sporting less than 1 trillion dollars.


In the second quarter of 2022, things took a turn for the worse. The market report for Q2, laid out by the Non-Fungible, reveals that sales volume has decreased by 20.05% from the first quarter of 2022, from 12,639,781 to 10,105,967. The number of sellers has decreased by 35.88% and the number of buyers has decreased by 25.41%.


This data suggested that collectors weren't exactly interested in taking big risks when it came to investing in new and upcoming projects appearing on NFT platforms. They've decided to trade on the secondary market, where prices remained higher.


NFTs at one time depreciated by millions of percent, almost to several hundred, having been purchased for hundreds of thousands of dollars. Take Logan Paul, for example. His Azuki NFT, once purchased for a whopping $623,000, is now worth $10. Likewise, Steve Aoki's Doodles NFT has seen its value drop to less than $42,000.

Steve Aoki, Doodles NFT. Source
Even the stars aren't immune to the NFT tragedy. Snoop Dogg also lost more than $300,000 on CryptoPunk, bought for $1.1 million, which is now worth about $688,000. However, the most popular loss is Justin Bieber's journey with the Bored Ape Yacht Club NFT project. What started as a $1.31 million investment turned into a shocking $59,090.

Justin Bieber's the Bored Ape Yacht Club NFT. Source


The NFT market has plummeted in 2022, thanks to several factors including market oversaturation, scams, and the collapse of big systems. With a flood of NFT projects and the art of deception on the rise, investor hesitation contributed to the market downturn.

First factor. Market oversaturation

Before the NFT boom of 2021, the market was relatively niche, with just a handful of NFT projects grabbing attention. But when the hype hit its peak, it felt like everyone wanted a piece of the action. The result? An overwhelming deluge of NFT projects flooding the market.**

Second factor. Deception and scams

Where large sums of money start circulating, fraudsers immediately appear, eager to profit from it. The NFT market hasn`t been an exception. As interest in NFTs has grown, so had the number of fraudulent activities and scams targeting unsuspecting investors.


Hackers and scammers have seized upon the NFT boom, deceiving people and causing them to part with their assets. Discord breaches, malicious links, and the whole range of free NFT coin scams left many people with heavy losses and undermined confidence in the market.

Third factor. The collapse of big systems

When FTX, one of the largest crypto exchanges, filed for bankruptcy, allegedly due to a liquidity shortage and a disappearing act with the funds. Additionally, the Terra blockchain cryptocurrencies, TerraUSD and LUNA, have seen catastrophic drops in value, leaving investors reeling from significant losses.


In any ecosystem, when a big player fails, it can send shakes through the whole system. In the case of the NFT market crash, the collapse of important systems associated with Web3 contributed to the downturn.

What happened with the NFT market in 2023?

Despite the NFT market crashing in 2022, experts and enthusiasts are pretty sure that NFTs will bounce back to their best state. Even though there was a big drop in trading in June, the NFT market overall stayed strong in the first half of the year. The beginning of 2023 looked good for NFTs, with a sudden increase in trading activity. The launch of trading platforms like LooksRare and X2Y2 played a big part, along with the rewards they offered for trading.


NFT sales in 2023 reached around $17.7 billion, similar to the sales recorded in 2021. This is also almost a 10-fold increase compared to the same period last year.

Taking a closer look at the main factors, a pretty stable first half of the year was helped by a healthy growth in the number of unique buyers and transactions. But this was balanced out by a drop in the average sale price.


Even if we ignore the less valuable and less important projects, most collections nowadays aren't really worth much. Out of the 8,850 collections leading in market value, 18% are not worth anything, and 41% are being sold for prices between $5 and $100.

Less than 1% have a price higher than $6,000 – a far cry from the usual million-dollar deals made two years ago.

Source
Despite this, the NFT community's stability, combined with ongoing innovations in this area, is paving the way for a potential comeback. Thanks to forward-thinking NFT creators and big brands using this technology, the next bullish rise of NFTs looks promising.

Yuga Labs' Role in the NFT Comeback

Yuga Labs' groundbreaking games, like Dookey Dash, brought in new collectors and created a fresh wave of excitement in the NFT space. Thanks to these innovative Yuga Labs projects, they became the driving force behind the NFT comeback.


Their contribution to a whopping 30% of all Ethereum NFT trades in just one month made them a beacon of hope for the NFT market. As we move forward, their impact will inevitably determine the course of NFTs for many years to come.


NFT brands are selling stuff in big regular and online stores. We are seeing the launch of major blockchain-based games. And more big companies are joining the NFT world. As a result, NFT-based brand building could be a significant factor beyond just the recovery but also surpass previous heights in 2024.

Will NFTs be reborn in 2024?

The NFT market is expected to change a lot in 2024. Despite the prolonged decline and negative background, it's predicted that the NFT market will make around $2,378.0 million in revenue in 2024.

In 2024, the NFT market is expected to go through big changes with lots of new trends. Here are some of the important trends.

Metaverses

The global Metaverse market size is expected to grow steadily at the expected rate, recording a CAGR of 47.2% from 2023 to 2027. The cost of the metaverse industry will increase from $61.8 billion in 2022 to approximately $426.9 billion by the end of 2027.


The Metaverse NFT market is huge and includes a variety of digital assets such, as virtual houses, avatars, art, and even virtual fashion. Many things are making this market grow, like more people using blockchain, games, and virtual worlds becoming popular, and the growing demand for unique and scarce digital assets.


Additionally, the Metaverse NFT market gives creators, artists, and gamers new chances to make money from their digital creations, and investors can diversify their portfolios by investing in these unique assets.

NFT Aggregators

In 2022-2023, saw the rise of NFT aggregators. These platforms let traders buy and sell NFTs from different marketplaces, all in one place. Top aggregators Gem and Genie showed impressive growth: this year, the trading volume went over 511,000 ETH. That's about 21 times more than in 2021.


NFT aggregators also have extra benefits. They let traders complete whole collections by buying lots of NFTs at the lowest prices, without needing to go to each market separately.


The market share of NFT aggregators has also grown from just over 1% at the end of 2021 to about 5% today. Even though the market share of NFT aggregators is still not very big, recent purchases of Gem by OpenSea and Genie by Uniswap show strong interest from existing players in NFT aggregators. It confirms that NFT aggregators seem ready to play a big role in shaping the NFT trading scene for the long term.


Entering the era of Web3, the NFT world holds promises of growth, creativity, and financial opportunities. Will NFTs make a big comeback in 2024? It seems like Metaverse and NFT aggregators are ready to contribute significantly to the upcoming success.