Metaverse and NFT Hype Cycle Is Over: What to Expect in 2023?

A new report by Activate Technology reveals that the non-fungible token (NFT) and metaverse hype is over, and that both sectors will need targeted corporate interest going forward.

The future holds new use cases for NFTs to aid companies in building brand loyalty, while the metaverse will need sustained corporate development.

NFT use will change to community-building

According to new report released by the company, NFTs have gone past their peak bubble. Accordingly, the hype surrounding the space will gradually decrease.

NFTs will become mature products, with blockchain and Web3 driving greater utility for the tokens. Companies will also capitalize on the space to build communities around their brands. Buyers will also benefit from a sense of belonging.

Starbucks is already offering the Starbucks Odyssey experience that uses NFT collectible stamps that will give owners access to unique coffee experiences.

Additionally, the report revealed the shift in the demographics of current NFT market participants. It defines participants as those who “researched, discussed, browsed, bid on, purchased, displayed, sold, or created NFTs in the last 12 months.”

The number of U.S. participants increased from 12% in 2021 to 18% in 2022. Still, less than one-third of the U.S. population is still unaware of what NFTs are. Forty-three percent of NFT participants came from affluent households with incomes of $100K or more.

NFT sales in primary and secondary marketplaces, excluding LooksRare, have exceeded $23B in 2022. Most NFT owners are now buying them for display on social media and collections. This is unlike earlier in the NFT cycle, when people bought and traded NFTs as speculative investments.

Only 51% of adults 18 years or older bought them as investments in 2022, compared to 76% last year. Nineteen percent more buyers are using them for display purposes, while 4% more are treating them simply as digital collectibles.

Twelve percent less are buying them because of novelty. Two percent more are buying them to support an artist or athlete.

According to Activate Technology, in addition to the NFT bubble being over, the metaverse hype cycle is also over, with companies needing to identify opportunities and commit business resources to this area. Companies need to now focus on interoperability between virtual worlds to fully leverage the metaverse’s benefits.

The foundation for the metaverse has already been twenty-plus years in the making through immersive virtual worlds in games. Roughly 77% of gamers in the U.S. have taken part in non-gaming activities within games in the last year. They have undertaken avatar creation and personalization and buying virtual goods. 

Gamers in China, Japan, and South Korea have collectively spent 30 hours a month playing games like Roblox, Minecraft, and Fortnite that have certain metaverse elements. These elements include an immersive experience, social interactions, mixed reality, identity, and an in-game economy.

Virtual reality and augmented reality will not reach mass adoption and will not be the future of the metaverse.

“We expect to see significant and sustained investment in innovation over the next few years,” the report said in conclusion.