The NFT market, once a bright shining light of the promise of decentralized digital ownership, is experiencing some drastic changes and moves. From the way immersive entertainment has affected the nonprofit sector to how technology is reshaping television and even video games, one thing has become extremely clear. Simultaneously, the world of NFTs is rapidly developing, opening up new possibilities and pathways for ordinary investors and creators. ThrowingToken.com unpacks the soaring NFT sales volume, while contrasting it with the robbing user base. It further explores the impact of market ‘whales’ on the industry and the opportunities for consolidation.
The Shifting Tides: Sales Up, Users Down
New data tells a more complicated story about the NFT market. Now, sales have crumbled by 63% annually, down to $1.5 billion from $4.1 billion for the same quarter in 2024. This unprecedented drop doesn’t indicate that the market is crumbling. Instead, it's consolidating. Even the number of unique purchasers has taken a dramatic plunge. It dropped down from nearly 39,000 in March to around 25,000 in May. While active users have dropped, sales volume is still robust. That means a growing concentration of people are making up an increasing proportion of trades.
This trend is indicative of larger “whales” eating up the market. These are people or organizations that own large quantities of crypto and NFTs. Their buying and selling actions have a huge influence on international market prices. Just like one whale’s decision can make waves that impact thousands of traders. These whales often accumulate massive vaults of rare and valuable NFTs. They double-down on prestige collections such as “Bored Ape Yacht Club” and “CryptoPunks,” which further concentrates their most prized assets.
The emergence of NFT-centric organizations, like WHALE by WhaleShark, are a testament to this shift. Through these communities, whales find a highly collaborative environment with other like-minded collectors, further entrenching their ecosystem’s position within the world of NFTs. This concentration of power and assets raises serious concerns. It jeopardizes both the long-term health and accessibility of the NFT market for smaller investors and independent creators.
The Whale Effect: How Big Players Impact the Market
Even though whales have outsize influence on the NFT market, their impact is hard to overstate. Their buying and selling activities at scale can create strong incentives to shape public perception with respect to the value of projects. This effect can reach entire classes of NFTs. The speculative fever of the NFT market only deepens this impact. In 2020 and especially 2021, NFTs were selling for millions. Fast forward to today, their value has tanked, highlighting the speculative nature and risk of investing in these digital assets.
By October 2022, the daily average value of NFTs sold on the Ethereum blockchain was down to just 3% of its January value. Notably, this drop further underscores how delicate the market remains to overall economic conditions and changes in investor sentiment. We project the market value will decrease by 11.01%. As we navigate this transitional period, it’s important to recognize whale benefits.
A small number of elite market participants possess a staggering concentration of NFTs. This level of concentration opens the door to costly market manipulation and price gouging. This situation creates an additional uneven playing field. It further fixes the deck against regular investors and will likely drive away new players looking to get into the game.
Navigating a Consolidated Market: Strategies for Investors and Creators
This drop in the user base will have the effect of creating a more discerning and mature market. Only the best brands and the most frontier-pushing projects can survive in this new paradigm. Whether you’re an NFT investor or creator, getting ahead of this new and evolving landscape is critical. Here are some strategies to consider:
For Investors:
- Diversification: Instead of focusing solely on one type of NFT, such as digital art or collectibles, investors can spread their investments across various categories.
- Fundamental Analysis: Evaluate the track record and popularity of the artists behind a particular project.
- Setting Stop-Loss Orders: One way to mitigate potential losses when trading NFTs is by setting stop-loss orders.
- Staying Updated: Set aside dedicated time each day to catch up on any updates that may impact your NFT trading strategies.
For Creators:
- Explore Diverse Revenue Streams: NFT creators may need to explore alternative revenue streams beyond primary sales and secondary royalties.
- Customizable Royalty Terms: Some platforms, like Mintable and Manifold, allow creators to customize royalty terms.
Optional royalty fees are increasing on unauthorized NFT marketplaces such as Sudoswap and Magic Eden. This new trend presents daunting challenges and unique opportunities for creators. The cash-flow consequences of lower royalty payments aside, tailored royalty terms can give states greater revenue-shaping flexibility and control over their income streams. NFT creators need to look beyond primary sales and secondary royalties for revenue. They can break up their labor into fractions, or provide special services and content to token-n holders, to increase their earnings.
The Future of NFTs: A More Concentrated Landscape?
The NFT market is at a crossroads. Yet as governments move quickly to harness this technology, today’s trend toward market consolidation threatens to leave marginalized populations behind, limiting access and fair opportunity. As the market matures, it's likely that a smaller number of established players will dominate, making it more challenging for newcomers to break through.
The effect on first sales is another big factor here. In addition to dwindling buyer interest due to increased royalty fees and changing marketplace dynamics, it seems some new NFT projects’ profit margins are taking the hit. To prepare for this rapidly-changing environment, you need to get smart. Investors and creators past and present all must learn to work in the reality of a more consolidated space.
In the end, the success of NFTs will be determined by the community’s capacity to promote increased inclusiveness and transparency. Encourage equitable and transparent market practices to protect the interests of creators and collectors alike. Together, these simple actions can help create a more exciting, welcoming NFT ecosystem that celebrates the potential of digital ownership and innovation.
