The NFT market falls for the 5th month

by James · October 3, 2022

Sales of non-fungible tokens (NFTs) fell for the fifth consecutive month in September to just over $500 million in sales, the lowest level since July 2021, according to NFT aggregation website CryptoSlam.

Driven by an ongoing drop in Ethereum prices, the blockchain that hosts the vast majority of NFT collections, September’s monthly sales volume represents a roughly 90% reduction since the record $4.7 billion in sales in January 2022.

While the number of unique buyers grew slightly from last month, the number still failed to break half a million, registering around 480,000 for the month – representing a 55% drop from its peak in January.

“It’s down and it’s hugely down,” Yehudah Petscher, NFT relationship strategist for CryptoSlam, said of the NFT market in an interview with Discard. “And I don’t think that’s changing anytime soon.”

Considered a crucial component of the resurgent Internet of Web3 – where gaming, social media and financial services are run through decentralized applications controlled by users’ wallets – a lagging NFT market could hamper the adoption of this burgeoning field.

“NFTs are key to what’s coming to this whole Web3 experience — it’s important to that, I think,” Petscher said. “I don’t think blockchain really came to mass adoption until NFTs became a thing. I think it would have happened inevitably, but NFTs are accelerating it.”

Table of Contents

Merging interferes

September was also an important month for the Ethereum network, as the long-awaited “Merge” took place on September 15,^{which saw the network drastically change its basic infrastructure.}

There were some concerns that this may have wreaked havoc on the NFT market, as some Ethereum miners who wanted to resist the merger split the network, effectively duplicating the NFTs from the original network. In preparation for this fork, many marketplaces, including market leader OpenSeaannounced that they would only continue to support NFTs on the Ethereum mainnet.

Silent adoption

Despite the downturn in the market, Petscher said Discard that there is still a lot of construction going on in the industry, and adoption continued to grow in September, albeit more slowly.

Tech giant Apple Inc. created a buzz recently by announcing that it is adding support for NFTs to its app store, bringing NFTs and Web3 to one of the largest app stores in the world.

Instead of welcoming the move, NFT advocates decried the fact that Apple would treat the transactions as in-app purchases, subjecting NFT purchases to a 30% transaction fee.

While this may be standard in the app store, the high fee sets Apple apart from contemporaries such as OpenSea, which only charges a 2.5% fee. “Now Apple is killing all the NFT app companies they can’t tax, crushing another new technology that can compete with the grotesquely overpriced in-app payment service. Apple must be stopped” tweeted Epic Games CEO Tim Sweeney.

Entertainment giant Walt Disney Co. also subtly signaled a move into the Web3 world recently, by advertising for a lawyer specializing in NFTs, metaverse, blockchain and decentralized finance.

The job posting says the attorney will provide legal advice to the firm on global NFT products, and “provide thought leadership and strategic direction for products involving digital currency and blockchain technology.”

After a flurry of crypto commercials in the industry earlier this year, sports teams are also promoting their entry into space. Through a partnership with blockchain infrastructure firm Chain, the American football team New England Patriots is now registered with the Ethereum Name Service (ENS) at “patriots.eth.”

ENS is a protocol that condenses long wallet addresses into readable sentences ending in “.eth”, reducing possible confusion and speeding up transactions on the Ethereum blockchain.

“During these periods, this is when people put their heads down and build products and innovate,” Petscher said. “Everywhere I look, it’s very active … it’s just starting and we feel this momentum and the payoff will be on the way in a few years.”

Monkeys on top

As usual, the top five best-selling collections for the month featured heavyweights Bored Ape Yacht Club (BAYC), Mutant Ape Yacht Club (MAYC), CryptoPunks, and fantasy football series Sorare.

However, QQL Mint Pass, a generative art project that first debuted in September, came in second with over $25 million in sales volume for the month.

BAYC was the top-grossing collection with USD 32 million in sales.

Petscher told Discard that as the market matures, buyers are looking for more utility out of NFT projects. While profile pictures drove previous bull cycles of the market, that became less and less the case.

BAYC, MAYC and CryptoPunks all belong to the same extended universe and are part of the BAYC metaverse project Otherside, whose NFT land sales are also top sellers in their own right, with over $14 million in sales for September.

But as the bear market continues, Petscher argues that many projects that offer nothing beyond the profile picture tool may struggle to maintain a community and may collapse altogether.

This is cause for concern, as he believes the bear market is just getting started.

“I still think we’re in a long-term bear,” Petscher said. “I think we are at least a couple of years away from the market returning to something similar to what it just was [at the beginning of this year].”