Non-fungible tokens (NFTs) have taken a back seat in recent discussions and excitement surrounding the approval of a spot Bitcoin exchange-traded fund (ETF) in the US market.
Today, GameStop announced the closure of its NFT marketplace, indicating its withdrawal from the cryptocurrency space. The company’s statement cited “the continuing regulatory uncertainty of the crypto space” as the primary reason for this decision.
In addition to GameStop’s move, X, formerly known as Twitter, quietly removed all references and options for owning NFTs as an account avatar. TechCrunch reported on January 8th that X had discreetly removed the feature that allowed paid subscribers to set an NFT as their profile picture.
These developments reflect the shifting dynamics and evolving priorities within the cryptocurrency and NFT space, influenced by regulatory concerns and changing market trends.
NFT Trading in Decline
NFT trading has experienced a decline for over a year, with data from Statista indicating that the number of active wallets engaged in NFT trading decreased by more than 25% between Q2 and Q3 of 2023. This marks a significant drop from the end of 2021 when there were approximately two million estimated users.
The ongoing bearish trend in the NFT market can be attributed, in part, to the overall stagnation in the cryptocurrency market. The question arises: Are NFTs heading towards a permanent decline, or is there potential for a resurgence in the world of digital collectibles?
What Causes NFTs to Surge?
NFT trading has witnessed surges at various points in time. Statista points out that the initial surge occurred in 2017, driven by the popularity of collectible CryptoKitties. The second surge took place in March 2021, as media coverage highlighted the largest NFT sales up to that point. Another surge occurred in August 2021, largely attributed to the success of Axie Infinity, a popular NFT game in Southeast Asia.
In December, Dapp Radar reported a modest uptick in NFT trading volume, reaching over $994 million, marking a 125% increase compared to the previous month. This period saw a total of 3.67 million NFT sales, with Blur leading the NFT sector with a 35% market share in trading volume, followed closely by OKX at 32%. OpenSea, although experiencing a yearly low at 14%, still maintains an active user base of 191,000 traders.
Over time, luxury brands such as Prada, Gucci, and Dolce & Gabbana have ventured into the NFT space, occasionally releasing NFTs. These brands aim to increase their brand exposure and combat counterfeiting, among other reasons. This raises questions about the practical use cases for NFTs.
In the art world, NFTs have been employed to tokenize physical assets like artwork and collectibles. This trend is gradually gaining momentum and reshaping the art industry, altering how we own and trade digital assets.
