NFTs seem to be everywhere as of late, whether being touted by celebrities ranging from Justin Bieber to Heidi Klum, but data show they account for just 1% of the overall cryptocurrency market.
Nonfungible tokens have a combined value of about $16 billion, a sliver of the roughly $2 trillion ecosystem of thousands of digital assets, according to an analysis of NFTGo data by crypto information and research firm Messari. That’s even with some selling for millions of dollars.
“The market can be saturated in some regards, but it can also be small compared to where it will be in several years from now,” said Mason Nystrom, senior research analyst at Messari. “Within the next five years, I expect this industry to grow significantly and the reason for that is because NFTs can be anything, it’s just a file standard.”
Unsurprisingly, avatar NFTs make up nearly half of total value at 46%. Among the most popular collections are CryptoPunks and Bored Ape Yacht Club, which count Serena Williams and Jimmy Fallon among the ranks of owners. Some NFTs give collectors access to exclusive social clubs, and are often enshrined as profile pictures on social media. Notably, Twitter recently gave its users the ability to connect their digital wallets to the platform to display NFTs as their avatar.
Nystrom, who wrote a report based on the data, expects NFTs with greater utility to gain more traction beyond social value, with incentives such as cash flows and other monetary benefits. At this stage, the majority of revenue made in the asset class derives from flipping tokens for a higher price than the original purchase.
“Over the last few months, founders and projects started to get smarter, they try to attach some real utility, some real use cases to an NFT” such as seed funding, said Gritt Trakulhoon, an investment analyst at Titan Global Capital Management USA Inc. “The majority of the activity and investment are not just going to be on profile pictures of NFTs.”
© 2022 Bloomberg L.P.