The NFT landscape has shifted towards utility-based projects during the bear market of the past year. So this could be good for the sector.
New NFT Project Mints Have Moved From Speculation In The Last Year
According to a report released by Ark Invest, the NFT market has undergone a bear market shift. To track how the sector has changed, the report has used data for NFT mints taking place in each quarter of the year.
The share of total mints contributed by each different type of project is considered here. “Project types” are made up of art, avatars, collectibles, games, utilities, and virtual worlds.
Here’s a chart showing how the percentage dominance of each of these job types has changed over the past few years:
Looks like utility took over during 2022 | Source: Ark's Big Ideas 2023
As shown in the chart above, at the beginning of 2019, the NFT market was mostly made up of collections and games-focused projects. Utility-based tokens took the lead at the end of the year, but soon their dominance slipped again.
In 2020, collectibles may not make up a large percentage of total NFTs, while utilities and games remain strong. Art-based tokens are also starting to gain popularity in 2020.
Collectibles are making a comeback in 2021 as the broader cryptocurrency market experiences a bull run. Game projects, however, saw a pretty low percentage of mints during this period.
When the bear market then took hold in 2022, all types of projects, including collections, saw their dominance shrink, with one type of NFT taking all the market share: utility.
Utility-based projects are those that generally have some value attached to them, unlike collectibles whose value is mostly driven by speculation. Examples of project types that would fall into this category include ticket tokens, on-chain domain names, and digital memberships.
The fact that the market is now more focused on utility NFTs that have fundamental values could be a healthy development for the sector, according to the report. In this way, the period of bears killing interest in projects based on speculation can be an advantage for the market.
But in terms of trading volume, the NFT sector is still dominated by well-known collections like Crypto Punks and Bored Ape Yacht Club. “Trading volume” here refers to the total number of transactions observed for the token.
The chart below shows how the volume dominance of different project types has changed over the years.
The collectibles seem to have occupied the largest volume percentage during the past couple of years | Source: Ark's Big Ideas 2023
BTC price
At the time of writing, Bitcoin is trading around $23,800, up 3% over the past week.
BTC has surged today | Source: BTCUSD on TradingView
Featured images from Andrey Metelev on Unsplash.com, charts from TradingView.com, Ark Invest