Why Are People Still Buying NFTs in 2023?
The crisis in the non-fungible token market, which for a long time held great appeal for investors, continues. In April 2023, trading activity on NFT marketplaces hit new lows. The daily number of individuals wishing to sell their NFTs consistently exceeded the number of potential buyers.
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The NFT marketplace — A surplus of supply over demand
Per a scrutiny by data aggregator CoinGecko, there were a mere 5893 participants in the NFT market on the 19th of April — one of the most scant figures since the advent of the year. The all-time low was marked on the 18th of June, 2022, when only 5343 individuals were active.
The last “halcyon” day in the market, a day when aspiring acquirers outnumbered hopeful sellers, was on the 11th of March, 2023. Astoundingly, the number of individuals drawn to the marketplace with the intent of securing an NFT was a slender two more than those who aspired to divest their tokens — 9756 versus 9754.
The three most expensive NFTs ever to exchange hands (as of May 2023) Source: crypto.com
Despite the gloomy picture, DappRadar's tracking data reveals that the total volume of global NFT transactions in April soared to $1.4 billion. This begs the question: in the face of waning profitability and diminishing popularity, what impels people to persist in their pursuit of NFTs?
The Driving Forces behind NFT Purchases
The decision to invest in NFTs is influenced by a variety of factors. According to the pundits at CoinGecko, one could enumerate at least 11 compelling incentives that spur crypto aficionados to stake their claim in the NFT landscape in 2023:
1. Pragmatic considerations. An impressive 75% of NFT proprietors appraise the practicality of a collection prior to acquisition. They desire to uncover as many potential applications for their assets as possible. Merely amassing a collection holds allure for a scant one in four token holders.
2. The prospect of long-term financial gain. Most NFT proprietors are undeterred by the present market climate, instead keeping their eyes on the prize — the potential to offload their token at a lucrative price point in the future. Such occurrences are, in fact, far from rare in the realm of collectibles.
The Merge, a project by digital artist Pak Source: gemini.com
3. Obtaining a stake in a Decentralized Autonomous Organization (DAO) or a company that specializes in innovation motivates 7 out of 10 NFT buyers.
4. The uniqueness of the technical solution also plays a significant role. Most NFT enthusiasts pay particular attention to the technology that underpins the tokens.
5. 70% of owners cite the desire to join a community and share their values and interests with other members as a reason for purchasing NFTs. This is often seen as a way to elevate their social status.
6. A sense of enthusiasm about the business model of a certain NFT collection is another motivating factor.
7. The aesthetic pleasure derived from the NFT image is also noteworthy.
Everydays: The First 5000 Days. An NFT in the form of a collage of images from the “Everyday” series, created by the American Beeple. Source: cryptonews.com
8. The prospect of short-term profit is enticing for many, with 66.8% of NFT holders buying tokens in hopes of quickly selling them at a higher price. Despite the ongoing crypto winter, speculative trading continues in the market.
9. As a form of personal savings. 63% of NFT holders purchase these assets to hedge against inflation. CoinGecko suggests that this might not be the best strategy given the current bearish crypto market.
10. The desire to make a charitable donation was cited as an important factor for purchasing NFTs by about 60% of respondents. However, the remaining 40% expressed disinterest in using NFTs for fundraising, despite societal expectations that might encourage such responses. This implies that the actual number of people willing to participate in social NFT projects might be much lower.
11. Revolutionary sentiment is the least cited reason for buying NFTs. While 59.5% consider the desire to disrupt established financial systems, property rights norms, and content creation principles as important, only 10% hold entirely conservative views.
The dynamic NFT Clock counted the days spent by the disgraced journalist Julian Assange in Belmarsh prison. Source: The Crypto Times
Despite these trends, Bloomberg experts suggest that NFT sales may recover from their record lows. In early May, marketplace Blur launched a perpetual lending service called Blend to increase NFT liquidity. This service allows owners to instantly secure loans against their NFTs and acquire assets by only partially paying for them. Within four days, Blend issued more than 1,300 loans, totaling approximately 13,842 ETH (around $26 million). This initiative spurred a 30% week-over-week increase in NFT sales, calculated in monetary terms.
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