If someone walked up to me and said at the beginning of the year, NFTs will easily surpass $1 billion in sales, GaryVee will launch an NFT project, and Axie Infinity becomes one of the top five NFT marketplaces, I would have replied, “I’ll believe one of three”. But, the past quarter (Q2’21’) witnessed over $750 million across the top five collectibles, Axie’s Marketplace generated $7.7 million in fees, and GaryVee has already earned over one million in royalties from his NFT project. Let’s break it down.
The media narrative that the NFT market is dead or that the bubble has popped is objectively mistaken. The media largely focused on crypto art and collectibles (e.g. NBA Top Shot), but the broad NFT ecosystem continues to grow. In fact, OpenSea recorded its best month ever in June in terms of NFT sales volume. Rarible’s poor performance (relative to OpenSea) can largely be attributed to the marketplace not providing access to some NFT categories that boomed over the past few months including NFT avatars, Art Blocks, sports collectibles, and virtual worlds.
OpenSea is telling a canary in the coalmine for NFT growth. In June, OpenSea facilitated over 211,000 NFT sales across nearly 40,000 active traders.
Overall, June marked OpenSea’s best month ever for NFT volume, a record number of NFT sales, and its second-best month of active traders.
While OpenSea remains the overall marketplace leader, Axie Infinity surged throughout the quarter becoming the four largest NFT marketplace. Notably, Atomic Market – the go-to marketplace for NFTs on WAX – now ranks 8th in NFT marketplaces.
The Axie Treasury is now valued at over $21 million, with 85% of it having been ($18 million) accrued in the past quarter through breeding and marketplace fees. Axie Infinity has set itself apart from the rest of the pack – crypto games – and continues to rise. The next major milestone will be the launch of AXS staking in Q3, and the alpha of its virtual world, Lunacia in Q4.
Perhaps one of the most significant trends throughout the past quarter was the continuation of NFT avatar projects. NFT Avatars – collectibles specifically designed for individuals to represent themselves across the internet (e.g. CryptoPunks) – continued to grow in popularity as the emerging sector generated nearly $350 million in secondary sales throughout Q2’21 and nearly $600 million in the first half of 2021.
Just as DeFi’s summer witnessed a food-based fork of every successful DeFi protocol, NFT blue-chip projects like CryptoPunks are undergoing a similar fork-apalooza.
Most of these new projects launched with CryptoPunk-esque traits include a limited number of around 10,000 NFTs, unique attributes across each NFT with different rarity levels, and a community focused on advocacy regarding the future value of its avatar project.
The Larva Labs team was quite intentional with their Meebits project. Since Meebits were claimable by Punks or Glyph holders, Meebits provided added value to the existing Larva Labs community. This creates the perception of Meebits as connected to CryptoPunks – and the punk value narrative – as opposed to the perception of devaluing their existing collectible from a newer, unrelated NFT. Moreover, Bored Apes have notably generated over $60 million in sales in Q2’21 and currently rank 3rd on the NFT avatars list by volume (behind Punks and Meebits).
However, most of these NFT avatar projects might be relegated to the same fate of Hashmasks, a once-prominent NFT project that has since lulled since its February launch, only generating $2 million in secondary sales over the past quarter.
A larger point with NFT avatars is that most of these communities are relatively small and owned by a small number of individuals. Meebits have the largest owner base, although they do have twice as many NFTs (20,000 vs ~10,000) compared to most of the other NFT avatar projects. Still, there is a strong concentration in all of these projects, with wealthier individuals like Gary Vaynerchuk who revealed that he owns 52 Punks and 54 Meebits.
Ultimately the concentrated ownership helps drive the scarcity narrative, but reduces the growth of the community unless individuals sell. Similar to the luxury goods industry, there’s a limited number of buyers. Additionally, as other types of intellectual property launch NFT avatars (think Batman NFTs) then the demand for crypto native avatars may decrease. Genies – avatar NFTs on Flow – recently raised a $65 million Series B in May and has established partnerships with various celebrities including Rihanna, Shawn Mendes, and Cardi B. It’s likely that these types of NFTs will draw significant attention as the respective stars sell their NFTs to their loyal fans.