The number of accounts trading NFTs has dipped sharply in recent months, new research has found, indicating that the digital art and collectible boom that started in 2021 may finally be cooling off.
Short for nonfungible tokens, NFTs are a kind of digital contract that use blockchains to prove ownership of a particular digital asset, like an image or a GIF. NFT trading exploded into an estimated $40 billion market last year.
But a report released Thursday by the blockchain analytics company Chainalysis found a steep decline in NFT trading. Almost a million accounts were actively buying or selling NFTs at the start of the year, but that number has since declined to about 491,000, Chainalysis found.
“NFTs saw explosive growth in 2021, but this growth hasn’t been consistent and has leveled off so far in 2022,” Chainalysis wrote in its report.
While NFTs have been a windfall for some traders and artists, they’ve also attracted hackers, thieves and scammers. An NBC News investigation last year found that the largest NFT marketplace, OpenSea, had done little to moderate the problem of people uploading and selling other artists’ works as NFTs. Hackers deliberately target NFT accounts to steal their assets and take over social media accounts to sell NFTs of their own. An earlier Chainalysis report found that some people repeatedly auction and purchase their own NFTs in an attempt to drive up their value.
A recent Wall Street Journal investigation into declining NFT sales found that the market prices of several high-profile NFT investments have cratered. An NFT of Twitter co-founder Jack Dorsey’s first tweet, which sold for $2.9 million in March 2021, recently received a high bid of $14,000. Another seller tried to auction a Snoop Dogg-curated NFT for $25.5 million, but received a high bid of $210.
It’s a shift that some in the digital art space saw coming.
The digital artist Beeple, who made history by auctioning off an NFT for $69.3 million last year, told NBC News in March that that market could be inherently fickle.
But the NFT market is far from dead and continues to attract new entrants. Starbucks announced Tuesday it would unveil an NFT loyalty program, and Coinbase, one of the largest U.S. cryptocurrency trading platforms, said Wednesday that it will begin allowing all users to try its new NFT exchange.