After taking a major hit in the cryptocurrency market through 2022 and 2023, the non-fungible token (NFT) sector is attempting to make a notable comeback, following the overall digital asset realm uptrend.
Once hailed as the pinnacle of the digital frontier, NFTs suffered a dramatic decline in global sales volume, losing 63% to just $8.7 billion in 2023.
However, as Bitcoin rebounds and the US Securities and Exchange Commission (SEC) approves the launch of exchange-traded funds (ETFs) tied to the digital currency, the non-fungible token industry is eager to rekindle interest in its digital space.
NFT Sales Surge And Stumble
According to a Bloomberg report, startups within the NFT space are now reviving narratives that emphasize the practical applications of NFTs in gaming, finance, and art.
These companies claim to have learned valuable lessons from past setbacks, aiming to transform the sector into more “durable” and “accessible” assets. According to Bloomberg, their goal is to present NFTs as more than expensive profile pictures limited to the elite, but challenges persist as the market seeks solid ground.
While sales of non-fungible tokens experienced a surge in November and December last year, nearly tripling to $1.7 billion, they dropped by 33% to $1.2 billion in January, indicating a complex road to recovery.
The report highlights that skepticism surrounding blockchain gaming, uncharted territories in financialized non-fungible tokens, and doubts about the ability of NFT art to regain its previous sky-high sales pose significant challenges for the industry.
Recognizing the volatility in the market, companies like Pudgy Penguins and Yuga Labs are venturing into gaming to drive the sector’s adoption. Pudgy Penguins, for instance, has developed a toy line inspired by their collection, which generated $10 million in sales over seven months.
Each toy comes with a QR code that connects owners to the Pudgy World online game, offering additional revenue streams for the company. Similarly, Yuga Labs focuses on developing the Otherside game, inspired by their Bored Ape Yacht Club (BAYC) collection.
Regulatory Scrutiny Looms?
Per the report, some startups are also exploring the integration of NFTs in finance. Collections like Bored Ape Yacht Club and Pudgy Penguins have become potential loan collateral, according to Stephen Young, CEO of NFTfi.
However, the emergence of finance-related NFTs could attract regulatory scrutiny, as seen with the US SEC’s settlement with Impact Theory LLC over an alleged unregistered non-fungible token “security offering.”
Meanwhile, NFTs in the art sector continue to perform well, with Sotheby’s reporting over $30 million in NFT and digital art sales in 2023.
According to Bloomberg, despite the growing optimism around NFTs, concerns remain regarding crypto’s association with “scandal and chaos,” potentially hindering the category’s growth.
Ultimately, the report notes that the challenge lies in changing the perception that anything related to web3 or non-fungible tokens is automatically deemed a scam.
Featured image from Shutterstock, chart from TradingView.com