• The hype surrounding NFT isn’t going away, as Coinbase and FTX continue to expand

  • The NFT market is expanding at a breakneck pace, but is there enough demand for nonfungibles to entice even more people and businesses to join?

    Nonfungible tokens (NFTs) and the exchanges that trade them have been the talk of the cryptoverse for quite some time. Even at the apex of the bull run, the interest in NFTs is not waning. It is debatable whether the traction they are gaining is at an all-time high right now and will continue to rise.

    According to DappRadar, the NFT industry generated $10.67 billion in trading volumes in Q3 of this year, a 704 percent increase from Q2. Ethereum and Ronin, two blockchain networks, accounted for 77.73 percent and 19.53 percent of the total, respectively.

    Year over year, trading volumes in the third quarter of this year are up 38,060 percent, a figure that is unusually high for the growth of an entire industry.

    To capitalize on this growth, the majority of the major cryptocurrency exchanges have begun to enter the space with the promise of creating efficient, low-cost marketplaces for these digital assets. In September, the crypto exchange FTX launched an NFT marketplace for its customers in the United States. Soon after, their marketplace was expanded to include Solana ecosystem tokens.

    Binance launched its NFT platform in June of this year to provide customers with access to the “burgeoning NFT space.” Following these announcements, Coinbase, a cryptocurrency exchange based in the United States, entered the space with its own NFT marketplace, which will be launched later this year. Users will be able to mint, purchase, explore, and display Ethereum-based tokens on the marketplace. Because all NFTs will be on-chain, creators will retain control over their work thanks to decentralized contracts and metadata transparency.

    The reaction to this announcement was overwhelmingly positive. Coinbase launched a waitlist for the marketplace, which attracted over 1 million users on the first day. The waitlist had grown to 2.43 million users at the time of writing, far outnumbering the monthly users of OpenSea, the largest marketplace by trading volume.

    ULTCOIN365 spoke with Alex Salnikov, co-founder and head of product at Rarible, an NFT marketplace, about these companies’ involvement in NFTs, and he stated:

    “Major corporations are launching their own NFT platforms because they recognize that digital collectibles are rapidly maturing into a new creative avenue that reaches a range of audiences they previously could not connect with, especially as NFTs become more mainstream appealing.”

    He also stated that, in addition to the monetary benefits for creators and businesses in the NFT industry, the space could be viewed as an opportunity to unleash creativity and expression in previously unseen ways. Ripple, one of the leading blockchain networks, has announced a $250 million fund for NFT creators aimed at accelerating NFT adoption in the crypto space.

    Despite the current hype and mainstream media attention, only a small percentage of the world’s population is aware of NFTs, and as these larger firms get involved, they will be doing a service to the sub-sector by increasing exposure and pushing for mainstream adoption.

    When such large corporations venture into emerging markets such as NFTs and collectibles, it is frequently a calculated risk. “Each of those big companies knows their customers well and the target market that’s on the rise,” said Pavel Bains, CEO of Bluzelle, a decentralized storage network for creators. It’s the smart thing to do for them to stay ahead of the curve. It doesn’t hurt their treasury much if it’s too early.”

    The market may be oversaturated.

    A closer look at the recorded metrics for the NFT market this month reveals an additional interesting insight. In October, SuperRare, an Ethereum-based NFT marketplace, set a new monthly trading volume record of $35.88 million. However, at the time of writing, there are 393 monthly active collectors, which is less than 42 percent of the all-time high of monthly average collectors in March of this year.

    This indicates that the market may be fairly saturated, with the same investors controlling a larger portion of the pie. Another metric shows a similar pattern for whales in NFT markets and platforms. Moonstream, an open-source blockchain analytics firm, published a report on Oct. 21 revealing that the top 16.71 percent of all addresses own nearly 81 percent of NFTs based on the Ethereum network in the second and third quarters of this year.

    Salnikov, on the other hand, believes this could be a good sign: “This appears to align with the 80-20 rule, also known as the Pareto Principle, and isn’t all that dissimilar to traditional markets, in which 80 percent of outcomes result from 20 percent of all causes.” Given that the NFT market is still in its early stages, this finding suggests that it is becoming more mature.” This metric, according to Bains, is part of a larger phenomenon:

    “Right now, the same could be said about BTC. Buyers are likely to be half of those who were present prior to Coinbase’s IPO. This is how cryptocurrency works. “I don’t believe it alters the overall trend of crypto and NFTs.”

    Although Bitcoin (BTC) is clearly a much more mature asset than NFTs, it is still in its infancy in comparison to the traditional financial market. According to Sakinov, the industry has only scratched the surface of what NFTs can offer. As digital collectibles evolve, more platforms are becoming aware of the use cases in order to ensure that demand for NFTs expands beyond their collectible nature.

    Innovations such as play-to-earn aid in the growth of the industry.

    Until recently, the most talked-about NFTs were one-of-a-kind collections, such as CryptoPunks, or collections based on and endorsed by celebrities. However, aside from the bragging rights of being used as jpeg avatars and their potential value in the secondary market in the future, they are extremely limited in utility.

    Bains is skeptical of celebrity collections in general: “Celebrity collections will simply die on arrival.” They will appeal to their fans and rise gradually, similar to physical Celebrity collectibles. They will, however, not experience the massive demand and price appreciation that crypto native products do.” He went on to say that there is ample evidence that crypto has its own culture and desires products that are born from within it.

    Beyond providing users with the ability to own crypto collectibles, blockchain-based gaming protocols with a play-to-earn (P2E) model, such as Axie Infinity, CryptoBlades, and Mobox, are gaining traction. Despite its success, this model is raising some eyebrows in the traditional gaming community.

    Leighton Emmons, co-founder of NFT project Blockchain Boys Club, expressed his skepticism about the P2E phenomenon to ULTCOIN365, calling these games a fad: “For one thing, online games are plentiful; anyone who plays online games goes through phases of obsession to complete neglect for a game — you eventually get bored and want a new experience.” He went on to say that “no one is going to build financial stability from the games given the hours you’ll have to put in.” The concept appears to be a fun novelty.”

    Emmons also believes that the P2E concept is a bubble in and of itself: “What happens when the NFTs are sold out and the players have earned all available funds (aka, their money)?” Will advertisements and sponsorships be sufficient to cover operational costs in addition to in-game rewards?”

    With or without P2E gaming, the NFT industry is exploding, enticing all of the major blockchain players to get a piece of the action. Even Ethereum co-founder Vitalik Buterin mentioned NFTs in a recent podcast interview, saying that they bring people into Ethereum who have a completely different mindset than DeFi and regular crypto people, for example: “NFTs have been interesting from a cultural perspective because they bring people into Ethereum who have a completely different mindset than DeFi and regular crypto people, for example.”

    As adoption of NFTs expands rapidly on networks other than Ethereum, adoption may continue to rise in the foreseeable future as larger industry players begin to place their bets.

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