After exploding earlier this year, the NFT market has slowed — but that doesn’t mean digital collectibles are dead.
Flash trends are a fundamental part of culture, and in 2021 alone, we have seen the rise and fall of more than a few meme stocks and alternative currencies short on use cases. And while the reality is often more complicated than reactionary news headlines tend to indicate, observers of the trading cards and collectibles market will tell you that the surge we’ve witnessed over the past 18 months is anything but a joke r/wallstreetbets would cook up.
Mainstream outlets have cranked out stories all year long heralding record–setting card sales in rapid succession. And amidst it all, the last year-plus has introduced the broader public to a digital complement to the trading card market: non-fungible tokens. An emerging but not entirely new class of virtual collectibles, NFTs have the dynamic potential to represent broader moments and experiences rather than simply depicting an individual.
Consumers were quickly excited by the possibilities, and the NFT market grew explosively in the winter and spring months as the sports world went wild for NBA Top Shot’s collectible highlights and Sorare’s innovative fantasy soccer card game.
However, after reaching a fever pitch, sales of non-fungible token collectibles are sharply down since their peak in mid-February. That now has a chorus of market observers raising an uncomfortable question:
Are NFTs dead?
Spoiler alert: the short answer is no. The longer answer requires a big-picture view of the collectibles market, especially trading cards, in order to help us visualize what a long-term, sustainable future for non-fungible tokens might look like.
A Dormant Market Comes to Life
Sports cards had fallen out of the mainstream consciousness for about two decades, but critically, there was always an avid, active community of enthusiasts who sustained the market on some level. Over time — and largely behind the scenes — the groundwork was steadily being laid for the explosion of the past year and a half.
A mix of feverish enthusiasm and new technology platforms has helped trading cards emerge as a true alternative asset class, with collectors able to utilize social networks and a growing community of virtual marketplaces. The niche corners of the internet dedicated to the hobby became increasingly populated.
Suddenly, they weren’t just niche anymore.
While several observers have attributed the major increase in collecting to the fact that we were all trapped in our homes due to COVID-19 and/or wrapped up in Jordan fever due to The Last Dance, the hobby’s recent surge would not have possible on such a scale if so much infrastructure, from grading to auctions to social networking, hadn’t been quietly put in place over the past 20 years or more.
The Fast-emerging NFT Ecosystem
As the physical collectibles boom took hold, the digital collectibles boom wasn’t far behind.
And following the $69 million sale of Beeple’s “Everydays: The First 5000 Days” art project at Christie’s, it suddenly became impossible to read the news or flip on the TV without coming across some version of the most basic of all explainers: “What is an NFT, anyway?”
And as soon as the basics of the format were internalized, it was as if everyone was finding their way into the NFT space at increasing speed, with platforms like CryptoPunks and Axie Infinity joining Top Shot and Sorare in obliterating benchmark after benchmark.
Not wanting to miss out, individual athletes got into the game, too. NFL stars like Patrick Mahomes and Rob Gronkowski, golf’s Bryson DeChambeau, the WNBA’s Renee Montgomery minted their own collections highlighting great moments from their careers. Tom Brady even announced he was investing in the creation of an all-new NFT platform, Autograph.
Daily sales surged, reaching a peak of $325 million in May, including nearly $102 million in NFT sales in a single day on May 3.
However, that figure has plunged and currently hovers around $110 million per month. The sharp downturn has led many to wonder if non-fungible tokens were a fad; a bubble that was always meant to burst.
While the drop has been rapid and significant, there remains a dynamic marketplace for many who are invested for the long haul and didn’t overreact to the earliest stages of the boom.
For context, let’s examine how NFT enthusiasts are approaching the market now that things have cooled off.
“The thing is that, each time you’ll notice such a quick increase on any trend, you’ll see a relative decrease, which basically stands for a market stabilization,” Gauthier Zuppinger, chief operating officer of NonFungible, told CNBC.
And notably, the NFT market goes hand in hand with the crypto market, which has recently been in flux. Savvy investors are taking a longer-term look at the NFT space as one that will continue to evolve and achieve increased adoption just as blockchain technology and cryptocurrencies have.
The demand isn’t going away. May 3 may have been the peak of single-day NFT sales dollar for dollar, but in terms of the total number of transactions, the first week of June saw 1.68 million — one of the highest figures of the entire year.
What’s Next in the World of Non-fungible Tokens?
The market for NFTs isn’t dying; it’s shifting. Stabilizing itself. Creators, buyers, and sellers alike are only beginning to wrap their heads around the implications and the possibilities regarding this broadened ecosystem of collectibles. And doomsday NFTs takes that only highlight serious dropoffs in buyers and revenue over short periods of time are wildly oversimplistic and miss a greater point.
A closer look at the facts demonstrates this directly.
NFTs distinguish themselves in a noisy collectibles space by leaning on the form to distinguish the function. While trading cards are snapshots of an individual, NFTs have the ability to capture experiences.
Think of the legendary moments in the history of sports and the emotions they carry with them. They get played on television on a loop and become a part of the culture (or even language, in the case of “getting Mossed.”) Sometimes, a moment is so iconic that the play-by-play commentator’s call becomes as famous as the thing itself. An NFT collectible has the capacity to render these broader, complementary components as one complete picture — and incorporate them into its value.
Considering this potential, we’re only beginning to tap into what NFTs are able to do.
Much like we’ve seen with the card market, the landscape is likely to evolve in ways that allow NFTs to be incorporated into a traditional investment portfolio more seamlessly. That means evolving the NFT experience not only to enhance visibility and liquidity, but the number of potential applications.
In sports, expect more gamification. Sorare continues to build out new formats for its base fantasy game. Zed Run, an increasingly lucrative virtual racing ecosystem featuring NFT horses, has already formed official partnerships with the Preakness Stakes and Stella Artois on the strength of its momentum.
Additionally, we can expect ongoing discussions around supply. The allure of legacy sports cards lies in their limited availability, and non-fungible tokens are especially capable of remixing this phenomenon through not just limited mints and exclusive 1-of-1s, but with collectibles that are directly tied to physical collectibles and virtual and in-person experiences.
There is also likely to be an expansion of NFTs in other cultural spaces, with music looking like the next great frontier.
Non-fungible token collectibles are still in relative infancy. An all-out collectibles revolution will require a bigger piece of the public to grasp what crypto technology entails and enables, but as this continues to occur, NFTs will be a part of that conversation.
And if we have learned anything from the trading card boom, it’s that markets can skyrocket in short order. You’ve just got to refrain overreacting to hype and work on building those long-term foundations instead.