Key Takeaways
- The Wall Street Journal has published a misleading article claiming that the NFT market is dying.
- The article cherry-picks examples of poorly-performing NFTs, highlighting the journalist’s lazy reporting.
- In the same article, claims of an imbalance between supply and demand in the NFT market completely miss the value proposition of non-fungible tokens.
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Data compiled by The Wall Street Journal suggests that the NFT market is in decline. However, active participants in the NFT market know that this couldn’t be further from the truth.
WSJ Compiles Dubious NFT Data
Contrary to what The Wall Street Journal may say, the NFT market isn’t “collapsing.”
In a Tuesday article published by The Wall Street Journal, reporter Paul Vigna claims that NFTs are dying. The piece opens with two bold claims: daily NFT sales have fallen 92% from a peak of about 225,000 in September and the number of active wallets trading NFTs has also plummeted almost 90% from its November highs. The statistics paint a damning picture. But anyone who takes a closer look at where these figures came from and the methodology that produced them should realize that they don’t hold up under scrutiny.
According to Vigna, these statistics came from NonFungible.com, a self-described NFT Market data and analysis platform. Specifically, they appear to come from NonFungible’s NFT market Q1 2022 report published on Apr. 28. But that report relies on a limited scope of data.
It states that its data was pulled from transactions involving ERC-721 NFTs on Ethereum, NFTs on the Ronin chain used in the play-to-earn game Axie Infinity, and NFTs on the Flow blockchain. Given the high number of Ethereum NFTs that now use improved contracts such as ERC-1155 and ERC-721A, NonFungible’s sample skews toward older NFTs and excludes many newer collections. For example, Azuki, which is currently the sixth most-traded NFT collection of all time, is likely missing from the data as it uses an ERC-721A contract.
Additionally, the two Ethereum sidechains included in NonFungible’s report, Ronin and Flow, have both had an abysmal quarter. Ronin, which hosts NFTs for Axie Infinity, has seen its player base sharply decline as it grapples with rebalancing its in-game economy following a recent $550 million bridge hack. Flow has also seen its biggest NFT product, NBA Top Shot, fall from grace in recent months, with secondary market sales volume dropping over 80% since February 2021.
For some reason, NonFungible’s data also omits NFTs living on other blockchains such as Solana and Polygon. According to data from CryptoSlam, Solana has processed over 21,000 NFT transactions over the past 24 hours, making up $7.3 million in trading volume. Polygon, while smaller, also facilitates over $1 million worth of NFT trades daily. By excluding the second and third most active chains for NFT trading, NonFungible’s data does not accurately represent the whole sector. Claims that the data indicates a declining NFT market are therefore misleading at best.
Cherry Picked NFTs
As Vigna’s article continues, he tries to back up his argument that the NFT market is declining with examples of NFTs that have dropped sharply in value. The first on his chopping block is Jack Dorsey’s NFT of his first tweet on Twitter, which sold for $2.9 million in March 2021 and has since struggled to sell.
It’s important to note that Dorsey’s tweet was part of the first wave of NFT euphoria that hit the space shortly after Beeple’s earth-shattering $69 million NFT sale at Christie’s. In that sense, it’s not surprising that Dorsey’s highly-specific NFT has not found another buyer. But to say that this example represents the entire NFT space shows a stunning lack of awareness.
Just three days before Vigna’s article hit the front page of The Wall Street Journal, Bored Ape Yacht Club creator Yuga Labs conducted the largest NFT sale in history. The drop, consisting of over 55,000 land plots for its upcoming Metaverse game Otherside, brought in over $310 million in initial sales. Less than a week since launch, the collection has exceeded $700 million in trading volume across more than 27,000 sales.
The Otherside land drop is not an anomaly. Throughout the first four months of 2022, several new collections such as Azuki, Okay Bears, Moonbirds, and VeeFriends Series 2 have sold out after hugely anticipated launches. Trading on secondary marketplaces like OpenSea has boomed (it saw $3.4 billion worth of trading volume last month), returning handsome profits for keen flippers.
To take just two of these collections as an example, VeeFriends Series 2 and Okay Bears have collectively seen close to 20,000 sales over the past week. In his article, Vigna says that weekly NFT sales are currently at about 19,000, but it’s painfully obvious he’s wrong.
Vigna’s article also highlights an NFT from the Snoop Dogg-curated collection The Doggies. Doggy #4292, one of the rarest pieces in the collection, exchanged hands for 9.69 Ethereum at the start of April. Vigna states that the NFT is now up for auction with a price tag of over $25 million. In reality, as is a popular practice in the NFT space, the owner has listed the piece at an outrageous price, likely to encourage high bids from NFT whales or show that they have no intention of selling it. The “highest current bid for 0.0743 ETH” that Vigna cites most likely comes from a scalping bot that routinely sends offers below the floor price to all holders in a given collection. To describe this as a “bid” on an “auction” shows inadequate research and an alarming lack of care in reporting.
Vigna claims that the market is losing interest in NFTs, but the truth is, he doesn’t know where to look. For those who are following the space daily, NFT mania is still going strong. The vast majority of available data backs this up; OpenSea, the largest NFT marketplace, now regularly brings in more than $10 million in revenue daily compared to averages of $6 to $7 million in November 2021. The exchange also registered its second-highest daily trading volume at the start of April, making $19.7 million in less than 24 hours.
Data from blockchain analytics service Nansen paints a similar picture. Nansen’s Blue Chip-10 index shows a rapid increase in the market capitalization of desirable NFT collections such as Azuki, Clone X, and Doodles. The index has seen a year-to-date increase of 81% and is currently trading at all-time highs.
Why Are NFTs Sought-After?
The final mistake from the The Wall Street Journal’s article that needs addressing is the so-called “imbalance between supply and demand” in the NFT market. Vigna alludes to the supply of NFTs outpacing buyers as a sign that the market is crashing. While this might be true for traditional equities, it gets the value proposition of NFTs spectacularly wrong.
To make such an argument reeks of dishonesty. It’s like saying nobody wants shoes anymore because thousands of ugly, low-quality sneakers sit unbought on store shelves even though Nike and Adidas are raking it in and limited edition Yeezys sell for multiples of the retail price on the secondary market.
Presenting it through the lens of the traditional art market, the supply of physical paintings produced far exceeds the demand from art collectors, but this doesn’t mean the fine art market is in decline. The barrier to entry for creating NFTs is incredibly low, which is a good thing for budding creators. But it also means a lot of trash gets minted. To measure the entire NFT market collectively in terms of supply and demand is irrelevant when each collection trades on its own fundamentals. Yuga Labs’ recent Otherside drop proves this. While other collections would struggle to sell out 55,000 NFTs for thousands of dollars apiece, Yuga Labs did so while still disappointing thousands of hopeful minters who weren’t lucky enough to get one.
Surprisingly, NFTs appear to be the only crypto assets currently defying the shaky macroeconomic outlook. While the Fed raises rates and risk-on assets slide, NFTs are still drawing in money from speculators and value seekers alike. NFTs could see a drawdown in the future in response to additional economic uncertainty. If inflation eats away at the amount of spare cash the average person has, it could reduce demand for non-essentials such as NFTs. But for now, contrary to what the The Wall Street Journal might have you believe, the NFT market is booming.
Crypto Briefing reached out to both NonFungible.com and Paul Vigna for comment but had not received a response at press time.
Disclosure: At the time of writing this piece, the author held ETH, SOL, and several other cryptocurrencies.
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