Market Update: A Look into NFT Performance in Q3 2022
Nonfungible.com, an NFT-focused platform, recently released the quarterly NFT market report, a document that explored in detail the performance of NFTs from July to September.
Is 2022 a Bearish Year for NFTs?
Created in 2014, the NFT space has enjoyed massive traction across different industries in less than a decade. The sports, music, and art industries have led the way through this adoption. The adoption across the entertainment industry, in general, fueled the constant growth of NFTs.
However, the NFT space is currently in a bearish phase and struggling. It has not registered any growth from July to September, according to Nonfungible.com’s quarterly NFT market report, a document that explored in detail the performance of NFTs in Q3.
Summary of NFT Performance in Q3 2022
Historically, NFTs have been lucrative investment options with their profound performance. However, in the third quarter of 2022, things were never soft for the NFT space. There were constant changes in the sales volumes.
Performance by Sales Volumes
In July, sales volumes ranged between 100k pieces and 200k per day but dropped to an average of 75k in August. However, by mid-September, the sales volumes increased slightly to the 100k and 200k range. On rare occasions, mainly July 19th, and September 27th, the sales volumes hit about 230k pieces.
Sales Value and Average USD Price
The value of NFTs traded in USD is also a substantial aspect to consider when investigating performance. The peak NFT volumes traded a day in June was $28m. In mid-September, the highest NFT value traded daily was $23m. There was a massive drop in the daily USD value of NFT sales within this period. But why? Average NFT trade value in USD also dropped, and active wallets also vastly reduced.
Serious Plunges Noticed from Q2
Looking at the performance of the NFTs in the third quarter could indicate that the space is enjoying remarkable growth. However, while the numbers were reasonable in the 3rd quarter, there were massive plunges from the preceding quarter.
The total USD value of NFTs transacted in the second quarter was $7.4 billion. However, this dropped vastly to merely $1.8 billion in quarter 3. Essentially, the total value of NFT transactions dropped by 77. Moreover, there was a massive 5% plunge in sales volume between the two quarters.
The numbers of NFT buyers and sellers also vastly reduced, signifying reduced interest in the NFT space over the three months. Resale profits between the quarters also dropped from $2 billion to $326 million. Resale losses dropped from $1.4 billion to $780 million. The difference between resale profits and losses is a $450 million total loss in trading. Basically, for the first time, NFTs recorded quarterly losses.
Dune analytics noted in August that about $26 million in NFT sales occurred on August 1st, a massive plunge from NFT sales on August 1st, 2021, which was about $94 million. Generally, the last quarter recorded the worst NFT performance. The winters within the crypto landscape drove the constant NFT value drops.
Search Volume Reduction Indicates Decelerating Adoption
Graph indicating the drop in search volume, especially in quarter 3, 2022
Another aspect given in the NFT report is the search volume parameter. Search volume refers to the number of online searches made about a particular subject. This parameter can be quite helpful in determining whether the interest in a subject is increasing or diminishing.
The report shows that the NFT search volume ending June this year was way lower than the high threshold set in October last year. In the third quarter, the search volume of NFTs constantly diminished, with NFTs recording their lowest 12-month score of 12 merely half of the June 2022 score.
Geographically, China is leading with a 100 score in search volume, followed closely by Hong Kong, Nigeria, and Singapore with 59, 51, and 45 scores. The US was also in the top 20 but scored 20. This search volume differences by region indicate that NFTs have been more trendy in Asian regions. Africa, led by Nigeria, is also on its way to more NFT traction.
Segmental Analysis of NFT Performance: What type of NFT is Performing Best?
While the reports indicate poor performance in the past quarter, the case was not entirely the same for all NFT segments. Different segments had different records in profits and losses.
An image showing the segmental performance of NFTs by sales volume and number of active wallets. Utility NFTs are leading in both.
Utility NFTs (Best Performer)
Utility NFTs had a net growth of 65% in trading volume; utility recorded a 72% loss in the NFTs trading volumes. The utility NFT segment is taking over with outstanding performances. In fact, in the third quarter, utility NFTs were quite profitable.
The collectibles segment in NFT made the most in USD revenue, recording over $537 million with 400k sales. The number of active wallets with collectibles drops.
Of all the NFT segments, Collectibles had the highest trading volume and USD value traded. However, due to the reduction in active wallets, it’s fair to say that collectibles slightly lost customers with the reduction in active wallets.
The problem with the collectible segment is that while it’s historically the golden goose, it’s currently experiencing massive weekly losses on resale.
Gaming NFTs (More Adoption of Gaming NFTs)
The number of active wallets with gaming NFTs was 180k in the period. The transaction volumes associated with gaming NFTs increased by over 150 thousand to 1.2 million.
Gaming NFTs recorded massive numbers indicating the continued growth of NFT applications in the gaming industry. The sales volume of gaming NFTs is the second highest at the moment. More interesting is that the transaction volume of gaming NFTs increased. This could indicate more adoption by individual gamers and more acceptance of NFT in the gaming industry.
Art NFTs are declining but still performing slightly well. The number of collectors trading these NFTs reduced by half from the preceding quarter.
Yes, the market was relatively slow in the last quarter. However, the highest trading metaverse NFTs in the period was the Otherside metaverse and its Otherdeed collection.
Profitable NFTs and Projects in Quarter 3
While the consensus is that NFTs have been on a massive downtrend this year, some remained profitable. Yuga Labs NFT Collections, including Bored Ape Yacht Club, CryptoPunks, and Mutant Ape Yacht Club, remained the best NFT investment options for the quarter.
In August, the best-performing NFTs were actually from the BAYC collection. Bored apes make up for most of the top-performing NFTs in the season. In the entire period, the most profitable NFT sales were as follows;
- Punk #2924 — This was the most profitable NFT sale, with a purchase price of over $71k. The punk was sold for $4.4 million, making a 6142% profit.
- Ape #5383 — The second most profitable NFT sale in the period was Ape #5383, whose purchase price was $246k but was sold for $1.47 million. The NFT made a 499% profit on the sale.
- Ape #6588 was sold for $1.189 million after being bought for $117k hence making profits amounting to over 900%
- Ape #6388 was the fourth most lucrative NFT, having sold for $1.08 million after being purchased for just $107k.
Having towered in July, August, and September, Bored Apes and Cryptopunks are the most attractive NFTs.
BAYC and Otherside towered the market in the initial quarter with a combined $2 billion in value traded. However, in the 3rd quarter, the duo combined for only $186 million. Interestingly, most projects which performed excellently in the second quarter were products of Yuga Labs, including CryptoPunks, BAYC, Meebits, and Otherside.
The Impact of Ethereum’s Merge on NFTs
One of the most significant events impacting NFTs was the Ethereum 2.0 update. The merge of the beacon chain began on mid-September 15th, with experts anticipating that it would foster more NFT adoption and increase transaction volumes. Being the most prominent host of NFTs, any change to Ethereum would impact the projects hosted therein.
So, how did Ethereum 2 merge impact NFTs? Immediately following the merge in mid-September, Bloomberg reported a surge in NFT sales. Bloomberg highlighted the two main collections, BAYC and Cryptopunks, whose demand primarily increased following the merger. The 7-day NFT trading volumes on Opensea increased by 5.3% immediately following the successful merge.
The merger promised to reduce gas fees, boost speed, and provide optimal scalability. Those promises largely influenced the sudden gains towards the end of September. Since it’s just a month after the merge, only time will help uncover the long-term impact of the merge on NFTs.
The most exciting thing to watch out for is the NFT’s carbon footprint drop. Originally, NFTs minted and transacted in Ethereum cost massive fees but released insane amounts of carbon into the environment. However, the new chain developed a proper system to help reduce the carbon footprint.
The NFT winters, which began towards the end of the second quarter, continued to hit the space throughout the third quarter, leading to drops in profits and sales. However, BAYC, Cryptopunks, and some other NFTs from Yuga Labs stand out as excellent investment prospects amid the winters.
While there are many NFT segments, gaming NFTs attracted more traction, with the transaction volumes increasing by 150k from the second quarter. That indicates that more online gamers are joining the NFT gaming space.
Finally, the high search volume in China indicates that amidst the ban on crypto-related products, many investors are still vastly interested in NFTs. While Africa is often lagging financially, the search volumes in Nigeria show that many people are interested in the digital finance space.