Non-fungible tokens registered $946 million in trading volume in January 2023, up 38% from December, and the highest on record since June 2022, according to an updated Feb. 2 report by DappRadar, which tracks and analyzes the activity of NFT marketplaces.
Non-fungible tokens, which provide proof of ownership of a digital asset like online artwork, surged in popularity in 2021 with the sale of a $69 million digital art piece by Beeple. Two large NFT art collections, including CryptoPunks and the Bored Ape Yacht Club, also saw a rise in popularity the same year.
“One reason for the surge in the NFT market in January is due to the success of Yuga Labs’ NFT collections, which accounted for 34.3% of the total NFT trading volume with a trading volume of $324.8 million,” said Sara Gherghelas, blockchain analyst at DappRadar, in an email to MarketWatch.
Yuga Labs are the creators of the Bored Ape Yacht Club, a 10,000 piece collection featuring cartoon apes. In March 2022, Yuga Labs raised $450 million to build a media empire, at a $4 billion valuation. Its holders include Justin Bieber, Jimmy Fallon, Serena Williams, and other prominent figures.
In January, Yuga Labs launched a product called the Sewer Pass access pass, which grants holders access to an exclusive online game. Gherghelas said the release of the Sewer Pass collection also generated “a lot of excitement in the NFT world,” and explains why trading volume was up.
An additional factor that contributed to the high NFT trading volume in January was the anticipation of a popular token launch set for Feb. 14, created by Blur, an NFT marketplace. The token “motivated users to be more involved in NFT trading, to have higher returns,” said Gherghelas.
The Blur marketplace has become one of the fastest-growing NFT marketplaces, and saw a trading volume of $187 million, which represented 20% of the market, despite being a newcomer into the space.
According to the same report by DappRadar, OpenSea still remains the leading NFT marketplace, with a 66.58% increase in trading volume last month, reaching $495 million. This represented 58% of the total trading volume of the NFT marketplace. NFT blockchain Ethereum ETHE, -4.40% also holds a dominance of 78.5% of the market.
In September, NFT trading volume had declined by 97% since the start of 2022. OpenSea, which had a trading volume of $4.8 billion in January 2022 saw just $250 million in trades by December.
This slump in trading volume was also followed by a slew of controversy around NFT projects. In October, Yuga Labs was probed by the U.S. Securities and Exchange Commission over unregistered offerings. In December, Justin Bieber, Steph Curry, Paris Hilton, and Jimmy Fallon were a few names among a long list of those named in a class action lawsuit against Yuga Labs for allegedly compensating celebrities to promote their products, without disclosing it.
It’s uncertain if NFTs will see the same hype they have in the past couple of years. According to a Jan. 31 report by Ark Invest, an asset management firm based in St. Petersburg, Florida, trading and creation of digital art diverged during the bear market.
“In 2022, NFT trading volume increased 15% year-over-year, dominated by high-profile collectible projects like Bored Ape Yacht Club and Crypto Punks,” the report states. “The share of NFTs minted, however, shifted toward utility-based projects […] focused on underlying value instead of speculation, the shift toward utility is a healthy development.”
As more big companies, like Starbucks and Nike, launch NFT collections, the focus has been on creating communities through perks like digital memberships or access to exclusive events, over just a still image of the artwork.
Note: In an earlier version of this story, we reported $941 million in NFT trading volume for January 2023, which was the original number on the DappRadar report. That figure was updated to $946 million after a recalculation by DappRadar.