29/03/2024 Can NFTs make me money in 2024? Why some still can, but many no longer do
UAE analysts examine relevance, profitability of NFTs after sales peaked in 2021.
NFTs have seen incredible returns on investment, with rare and sought-after pieces of digital art being sold for big profits. he reality, however, is many NFTs stay unprofitable. Image Credit: AFP
Dubai: Global sales of non-fungible tokens (NFTs) have been consistently falling ever since the once-popular investment medium reached a peak in late 2021, mostly as collectors have been spending lesser money on digital artwork. So are they still relevant or as profitable as before? Letâs find out!
âAfter digital art and collectibles were evidently transformed with NFTs, there was an investment boom. If you are an artist, collector, or investor, the NFT landscape provided you with numerous opportunities to generate income,â said Jaden Knowles, a digital asset trader in Dubai.
âNFTs have seen incredible returns on investment, with rare and sought-after pieces being sold for big profits, and some NFTs can still offer a unique way to diversify your investment portfolio if you have already invested in other digital assets. The reality, however, is many NFTs stay unprofitable.â
How do NFTs work?
An NFT is simply a unique and non-interchangeable set of numbers or unique data stored on a digital ledger, which can be used to uniquely code-stamp digital files such as photos, videos, and audio.
Even though NFT is defined as an unique code, the image or art associated with the number is also referred to as a NFT.
NFTs still showing signs of life, interest
Some NFTs still show signs of life and interest among businesses and consumers, with certain high-value brands like the Premier League, Louis Vuitton and McDonald's, issuing NFTs in 2023 that proved profitable later on with prices soaring since.
âOnly time will tell if the NFTs that are priced high right now will cost just as much or more in the years to come. While I believe its underlying technology will fuel a future for NFTs, several other experts donât see growth for most NFTs,â added Knowles.
Although revenues of NFT marketplaces are still expected to see double digit growth, rising by 41 per cent year-over-year to $2.37 (Dh8.70) billion in 2024, the market is losing its momentum, and this trend is set to continue in the following years, data from analytics site AltIndex.com showed.
Growth rate to drop steeply in five years
âThe annual growth rate in the NFT market is expected to drop to only 2.6 per cent by 2028 indicating significant cooling of investors' appetite after the 2022 âcrypto winterâ, which was a period of depressed asset prices in the cryptocurrency markets,â the website report revealed.
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According to NFT market tracker NonFungible.com data, total NFT sales recorded on some platforms generated an aggregated value of $245 (Dh900) million on March 20, one-third of the value seen on the same date last year, while the total number of sales plunged from nearly 200,000 to only 52,000.
âDespite the obvious negative trend, revenue in NFT marketplaces, the number one spot for people looking to trade or invest in these digital assets, is still expected to grow double digits, though much smaller than in previous years,â the tracked noted in its latest report.
NFT market to continue losing momentum?
A survey by market database Statista indicated that NFT marketplaces will be $2.37 (Dh8.70) billion in 2024, which is 41 per cent more than last year but only half the growth rate seen last year and 1,000 times less than the rate reported in 2021, the record year for global NFT sales.
Statista expects the market to continue losing its momentum in the following years. In 2025, the revenues of NFT marketplaces are forecasted to increase by 21 per cent to $2.87 (Dh1.5) billion, only half the growth projected for this year.
Statistics also show that 2026 will bring less than 10 per cent annual growth in the NFT space. Although the revenue of NFT marketplaces will increase to $3.36 (Dh12.4) billion by 2028, the annual growth rate is expected to drop to only 2.6 per cent, or thirty times less than last year.
Active NFT wallets plunge 72 per cent
One of the reasons for such a poor market projection, the above reports cite, is the constantly falling number of active NFT wallets and people willing to invest in NFTs. Last week, 25,700 active wallets were recorded, 72 per cent less than in March last year, according to NonFungible data.
The number of unique buyers plunged by 78 per cent in this period, falling from over 63,100 a year ago to 13,500 last week. Statistics also show the NFT market counted 15,200 unique sellers last week, or 67 per cent less than in the same month a year ago.
Bottom line?
What do the higher number of NFT sellers prove? Knowles agrees with the industry forecast indicates that lesser sellers imply more supply than demand in the NFT space.
âA steep drop in NFT sales will not only cause NFT owners to lower their pricing, but this will result in a further drop in NFT market value in the coming years,â he added. âThatâs only the beginning for the market to hit rock bottom â although that may still be a decade or two away.
âThe bottom line for potential investors is that the value of NFTs will stay subject to rapid changes due to varying market demand, and the popularity of the asset. Investing in NFTs has the potential to cause large fluctuations in value, which can pose a risk for those who are not well prepared.â
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