It’s been a record year for NFTs — non-fungible tokens — as the global market value of these digital investments has hit $23 billion, according to blockchain analytics firm DappRadar. The term has even been named Collins’ Word of the Year for 2021, and now, NFTs’ value is surpassing the market cap of some publicly traded companies.
One of their first forays into the mainstream consciousness for NFTs came when auction house Christie’s sold Beeple’s NFT for $69.34 million in March. Other top NFT sales in 2021 included Bored Ape Yacht Club (BAYC) for $26.2 million. Since, NFTs have cropped up not only in the art world, but everywhere else, being offered up by luxury brands such as Gucci among others.
And in the week ending Dec. 17, Nike, Adidas and Pepsi — which all joined the NFT bandwagon — managed to collectively secure more than $220 million in NFT trading volume, according to DappRadar.
Trading in NFTs climbed to $10.7 billion in the third quarter of 2021, an increase of more than 700% from the previous quarter, according to DappRadar, figures that are not surprising to several crypto experts.
Jack McDonald, CEO of PolySign, Inc. and Standard Custody and Trust Co., told GOBankingRates that NFTs are the first wave of a digital transformation, and often the first waves of such transformations easily get dismissed as fads because prices tend to fluctuate wildly.
“Think of Bitcoin. In its early days, the early adopters were touting its revolutionary technology while the ‘normies’ – that is, those who did not buy Bitcoin at the time – stayed away because the price fluctuated so wildly and even almost went to zero at least once. And look at the wealth now of those early Bitcoin adopters,” McDonald said, adding that NFTs are becoming more valuable among the general public for several reasons.
“Already, for example, celebrities, athletes and mega brands have quickly adopted this technology and are using it to interact with their customers,” he said. “Another factor that explains NFT growth is the fact that younger generations prefer to hold their assets in a digital fashion. So when it comes to art, that of the digital kind will increasingly be seen as more useful for a growing number of young people with disposable income and, thus, prices for such NFT-secured digital art will increase. Also, because NFTs are so useful at proving ownership and ensuring intellectual property rights, it is almost a foregone conclusion that even more artists and entertainers and influencers more generally will turn to this technology to monetize their creativity. So, in short, expect wild fluctuations in the price of NFTs, but also expect a long-term and overall meteoric growth trajectory that will enrich a lot of these early NFT adopters.”
NFTs Taking on Traditional Trades
To put things in perspective, Fortune listed some of the blue-chip companies that have seen NFTs surpass their market caps this year, they include (all data as of Dec.17, 2021): CarMax, which has a market cap of $22.36 billion; Carnival, which has a market cap of $21.5 billion; Ulta, which has a market cap of $21 billion; MGM Resorts, which has a market cap of $19.63 billion; Nissan, which has a market cap of $19.35 billion; and Domino’s Pizza, which has a market cap of $19.33 billion.
Dmitry Mishunin, the founder and CEO of HashEx, an audit and consulting company for blockchain-based projects, told GOBankingRates that the popularity of NFTs will likely continue to grow. Mishunin suggests that NFTs will increasingly attract more mainstream attention because the technology has proved its viability and is applicable to multiple business niches. Their primary benefit, he said, is that they remove the middleman.
“For example, in the music industry, where the share of the revenues that reach the artists baffles a lot of people, NFTs could gain a substantial share of the market as a distribution medium. We have already seen Kings of Leon release their album ‘When You See Yourself’ on NFTs and music producer 3LAU sell a collection of 33 NFTs for $11.7 million. So, it is more likely than not that many more will follow suit,” he said.
Any form of art — music, painting, literature, etc. — can benefit from this and everything can be turned into a token that can be directly accessed on a public blockchain, he added.
“NFTs give artists the freedom to create and manage their own merchandise too, and this is already becoming a popular trend,” he said. “On top of that, NFTs are being adopted as a carrier of value in an overwhelming majority of play-to-earn video games like Decentraland and The Sandbox. And if the metaverse gaming trend continues to develop, there is no realistic chance I see for the NFT market to crash, the NFT market does still have certain issues, but it’s a matter of time before they get fixed, and the users get a hang of the market.”
This sentiment was echoed by the DappRadar report, which notes that “seeing the increased activity from big companies like Nike, Adidas and Pepsi only goes to show that the NFT space is nowhere near done growing. With the potential of mass adoption, the hype for NFTs is becoming even bigger. Combined with the rising awareness that the metaverse and virtual worlds are getting, the blockchain industry as a whole will soon see the mainstream wave of interest.”
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