There is little to no doubt that the burgeoning crypto niche, non-fungible tokens (NFT) has been one of the best performing spaces in 2021 as it witnessed an unprecedented growth in transaction volume and the rate of its adoption.
While institutional investors have played a role in the continued growth of the space, a new Chainalysis report has indicated that 80% of NFT transactions so far in the year were made by retail buyers, while collectors and institutions drove the big volumes seen in the space.
Retail buyers dominate NFT scene
Per the Chainalysis report tagged “The 2021 NFT Market Explained,” available on-chain data between January and October 2021 showed that retail NFT transactions were over 80%, while collector-like transactions accounted for 19% of the transactions.
Interestingly, collector-sized transactions as of March stood at only 6% but increased as the year progressed to 19%. This is an indication that the space continued to draw interest as the year unfolded.
Chainalysis posited that institutional investors only accounted for 1% of the transactions, however, they made up for this with their trading volume which was around 26% within the period.
On how it determined the metrics to classify each transaction, the blockchain analytic firm stated that it believed transactions from $10,000 and lesser belonged to retail buyers. Collector transactions were those in the range of $10,000-$100,000 while institutional transactions were labeled as those beyond $100,000.
An interesting riposte from the study stated that “The data shows that the NFT market is far more retail-driven than the traditional cryptocurrency market, where retail transactions make up a negligible share of all transaction volume.”
Interest in NFTs is driven by lure of profits
While many invest in the crypto space as a way of hedging against inflation and making more money, investments in NFTs are primarily driven by the lure of turning a profit on investment in projects in the space. However, available data shows that not all of these NFT investments end up in profit for the investors.
According to Chainalysis, only around 29% of NFTs purchased during minting and sold on the platform resulted in profit. But, the chances of making a profit increases to 75.7% if a newly-minted NFT gets whitelisted.
According to NFTSKA, whitelisting is the process of getting a crypto wallet address pre-approved for a future NFT mint (also called a “drop”).
Using the available data before it, Chainalysis categorically stated that “it’s nearly impossible to achieve outsized returns on minting purchases without being whitelisted.”
It is important to note that in recent weeks, interest in NFTs has skyrocketed again since Facebook rebranded into Meta revealing that its new focus would be on how to bring more people into the metaverse. In the last seven days alone, the sale of virtual real estate properties like land and other virtual assets was around $300 million.
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Author: Oluwapelumi Adejumo