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NFT transactions exploded in 2021 as fans discovered the digital collectible tech built on the blockchain, but it has since stabilized and slowed its growth in 2022, according to a report by analysis firm Chainalysis.

Non-fungible tokens (NFTs) have been one of the most dynamic and prominent parts of decentralized web 3 technology over the last two years. And now there’s a big discussion about whether interest in NFTs is flatlining or not.

The Wall Street Journal cited data about flatlining this week, and some data analysts such as Dune Analytics disputed its interpretations of data from Nonfungible.com. Now the Chainalysis data will spread more fuel on that discussion.

NFTs are blockchain-based digital items whose units are designed to be unique, unlike traditional cryptocurrencies whose units are meant to be interchangeable. NFTs store data on blockchains — with most NFT projects built on the Ethereum blockchain — and that data can be associated with files containing media such as images, videos, and audio, or even in some cases physical objects.


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NFTs typically give the holder ownership over the data, media, or object the token is associated with, and are commonly bought and sold on specialized marketplaces, Chainalysis said.

NFTs saw explosive growth in 2021, but this growth hasn’t been consistent and has leveled off so far in 2022.

Since the beginning of 2021, NFT transaction volume has grown significantly, but this growth fluctuates. NFT activity ebbs and flows month to month — in 2022 thus far, the value sent to NFT marketplaces continued its 2021 growth in January, entered a downturn in February, and then began to recover in mid-April.

Chainalysis said the number of NFT buyers and sellers is fluctuating.

Overall, collectors have sent over $37 billion to NFT marketplaces in 2022 as of May 1, putting them on pace to beat the total of $40 billion sent in 2021. However, since late summer 2021, NFT transaction growth has come in fits and starts, with activity largely remaining flat except for two big spikes: One in late August, which was likely driven by the release of the Mutant Ape Yacht Club collection, and one stretching from late January to early February of 2022, which
was likely driven by the launch of the LooksRare NFT marketplace, Chainalysis said.

After that spike though, NFT transaction activity declined significantly beginning in mid-February, dropping from $3.9 billion the week of February 13 to $964 million the week of March 13 — the lowest weekly level since the week of August 1, 2021. The NFT market began to recover in mid-April, however, and is now approaching the weekly volumes it hit earlier in the year, likely due to the recent launch of Bored Ape Yacht Club’s metaverse project.

Despite these fluctuations in transaction volume, the number of active NFT buyers and sellers continues to grow. In Q1 2022, 950,000 unique addresses bought or sold an NFT, up from 627,000 in Q4 2020. Overall, the number of active NFT buyers and sellers has increased every quarter since Q2 2020, Chainalysis said.

In Q2 2022 as of May 1, 491,000 addresses have transacted with NFTs, putting the NFT market on pace to continue its quarterly growth trend in number of participants. The number of active NFT collections on OpenSea — meaning those with any transaction activity in a given week — has also grown consistently since March 2021, and currently sits above 4,000.

Who uses NFTs?

Number of active NFT collections on OpenSea is rising.

Analysis of web traffic to popular NFT platforms reveals that the asset class attracts users from all over the globe. Central and southern Asia leads the way, followed by North America and Western Europe. While some regions certainly lag, the fact that no region has made up more than 40% of all web traffic since the beginning of 2021 suggests that, like cryptocurrency as a whole, NFTs have captured a global audience.

The vast majority of NFT transactions are at the retail size, meaning below $10,000 worth of cryptocurrency. NFT collector-sized transactions (between $10,000 and $100,000) grew significantly as a share of all transfers between January and September of 2021, but since then have stayed flat. This suggests that, for the time being, the addition of new retail NFT investors is keeping pace with the addition of bigger NFT investors.

However, in terms of transaction value rather than number of transfers, Chainalysis said that NFT collectors make up a majority of activity. Institutional investors are nipping at their heels, and even make up the majority of activity in certain weeks when extremely large purchases have been made. For instance, during the week of October 31, 2021, institutional transfers made up 73% of all activity, largely due to the purchase of several NFTs in the Mutant Ape Yacht
Club collection.

More institutional-sized transfers followed in subsequent weeks, and since then, institutional transfers make up 33% of all activity. However, as is the case with the NFT market as a whole, the growth of institutional-sized NFT transactions hasn’t been consistently sustained.

Searches for NFTs are waning.

Between late November and mid-February, institutional NFT purchasing grew each week, reaching 1,889 transactions the week of February 13, after having spiked to 2,739 two weeks prior. Institutional NFT activity fell abruptly after that, dropping to just 473 transactions during the week of February 20.

As of April 17, 2022, institutional NFT activity has yet to reach the levels it did in the winter of 2021. This period of reduced institutional activity also roughly coincides with what appears to be an overall decline in interest in NFTs generally.

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