NFTs see some resurgence in interest and activity after crypto rally. Here’s why.

By Anushree Dave

Hi all – welcome back to the Distributed Ledger newsletter. I’m Anushree Dave, and I cover digital assets at MarketWatch.

It’s been a couple of years since nonfungible tokens, or NFTs, exploded onto the scene. They got investors, celebrities, artists, brands and the general public excited on the promise of proof of ownership of digital assets.

Notably, the artist Beeple sold a $69 million digital collage in May 2021, while major brands including Starbucks Corp. (SBUX), Nike Inc. (NKE), Adidas AG (XE:ADS) and Visa Inc. (V) also launched NFTs of their own.

But then the hype slowed down, and the NFT market tanked. The crash didn’t even spare celebrities like singer Justin Bieber, who purchased an NFT art piece for around $1.24 million in January 2022, only to see its price decline by 95% to around $60,000 by summer 2023. NFT critics and even some former enthusiasts deemed the scene officially dead.

Yet that sentiment has been turning around recently, with NFTs seeing a rise in interest again – at least on one popular NFT marketplace called DappRadar. I spoke with Sara Gherghelas, a blockchain analyst at DappRadar, to discuss what’s driving the upturn and whether NFTs are actually back.

What’s driving the rise in NFT interest?

Recent data from DappRadar show that the NFT sector recorded a 50% surge in trading volume, to $3.9 billion, as well as a 13% rise in sales, to 11.6 million NFTs, in the first quarter of 2024 – marking its strongest quarter since the first quarter of 2023. Those levels aren’t as high as during the NFT heyday of 2021 and 2022, but they’re more than we’ve seen in a while.

There are several factors driving the interest in NFTs again, according to Gherghelas. Similar to meme coins (which we discussed in last week’s newsletter), NFTs serve as a community to many, and investing in an NFT often brings access to a wider community of members, clubs and events. The NFTs that are most popular allow investors to be part of something larger than just owning them, Gherghelas said on a call with MarketWatch.

Certain cryptocurrencies that are doing well may also be driving the interest in NFTs again. With the price of bitcoin (BTCUSD) now at nearly $68,000, an NFT project called the Bitcoin Ordinals is seeing high trading activity on DappRadar’s platform.

“We’re also seeing more and more Web2 companies [and] gaming companies using NFTs,” said Gherghelas. She noted that gaming companies are using NFTs as a functional utility, whereby users who buy an NFT for a game might be able to use it to create a character or can find, buy or trade NFTs within the game experience. While the hype around NFT art pieces without any function has died down, that utility aspect of NFTs are what’s keeping them around.

But the news isn’t all positive, and the renewed hype could very well be short lived.

Major brands continue to retreat from the sector – including Starbucks, which launched an NFT loyalty program in December 2022 but recently shut it down, on March 31. Nike, which acquired Web3 company RTFKT for $1 billion in 2021, shut down the project in March 2024. Social-media platforms like Meta Platforms Inc.’s (META) Facebook and Instagram have also closed NFT-related features that they launched in anticipation of the Web3 boom. And since the collapse of FTX in November 2022, investors and crypto enthusiasts have grown increasingly wary of getting involved in hype cycles.

So while NFT platforms like DappRadar may continue to see occasional spikes in interest, there remain plenty of critics who still see the NFT space as a fad that isn’t going anywhere long term.

Crypto in a snap

Bitcoin is up 5.13% in the past 7-days, and Ether (ETHUSD) is up 6.44% in the same period, according to CoinDesk Data.

Must-reads

GOP says Biden administration is using crypto as a ‘scapegoat’ for foreign-policy failures (MarketWatch)

Bitcoin Was Left for Dead. Why Wall Street Is Bringing It Back to Life. (Barron’s)

Buy MicroStrategy stock because bitcoin should double in 2 years, analyst says (MarketWatch)

Bitcoin boosts 60/40 returns without adding much volatility, fund manager finds (MarketWatch)

-Anushree Dave

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04-10-24 1324ET

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