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Can NFTs lead a crypto recovery? It’s a little early to make such a claim, not least because many crypto participants remain convinced that the crash is not yet over and recovery remains distant.
Whether or not such readings are correct will become apparent over the coming weeks and months, but it’s noteworthy that NFT markets have seen a healthy-looking recovery over the past week, considering the general state of crypto (as in a smoldering wreckage).
This comes after an FTX-triggered dip, but the subsequent recovery has been swift and includes increased floor prices and sales volumes. This uptick is pronounced across the top ten NFT projects, taking in established, top-tier collections (such as the Yuga Labs stable) but also some newer projects.
Utility Not Needed
One reason NFTs may perform differently from the rest of the crypto is the question of utility, or, more accurately, a lack of utility. Regarding regular cryptocurrencies, it’s fair to ask, when assessing value, what utility they provide, and who will take advantage of it.
When it comes to NFTs, though, these questions take on other angles. There are certain collections in which it’s perfectly reasonable for the tokens to have zero utility, or for the utility to be a secondary concern.
In these cases, NFTs can be thought of more like works of art, or other rare artifacts that are desired by collectors who have deep pockets. These items have value simply for what they are, and sometimes due to historical significance relating to both art and technology.
Some examples would be CryptoPunks (which didn’t have to recover from recent, FTX-related market impacts, because they remained unscathed throughout), and some Art Blocks collections, such as Fidenza and Ringers. In the art category, we can find a few newer collections going up in price, with an example being Fontana, by Harvey Rayner, which is also part of the Art Blocks platform.
Or Utility Defined
On the other hand, there are NFTs which clearly are intended to have defined utility, and there are those that fall somewhere in between.
Bored Ape Yacht Club is perhaps the most well-known example of the latter. They have value simply as a prestige digital collectible (as in, not for any inherent utility), but at the same time, they function as membership passes, granting access to the Yuga Labs ecosystem and its future plans.
Then there are purely functional NFTs, such as metaverse land (in The Sandbox, Decentraland, Yuga’s Otherside, or any of the other, many competitors), and NFTs which are connected to real-life brands and companies.
In that last category, you can find the likes of Starbucks, Nike, Adidas, and several high-end fashion brands making use of NFTs.
Many Bases Covered
There’s a plausible scenario by which NFTs can, over the next few years, become one of the most influential areas of crypto. As a caveat, that doesn’t include Bitcoin, which exists in and defines an entire category of its own.
NFTs may become difficult to ignore because they cover so many bases, and can be utilized in many different ways. At their core, NFTs are a new digital primitive, allowing for any kind of data to be packaged up with a token and then held or traded.
For that to have begun with art and memes also looks like a helpful starting point. Art markets, after all, operate according to distinctive ebbs and flows that are very different to crypto markets, and memes, by definition, spread rapidly and cause disruption.
The Blockchains at the Heart of NFTs
Ethereum
When assessing NFTs, we also need to consider the blockchains on which they run. The primary chain is Ethereum, and here we see a mutually beneficial loop playing out.
Ethereum performed particularly well over the past crypto cycle, and we can expect this to continue in the future, as there are several narratives in favor of Ethereum: the switch to Proof of Stake is complete, web3 is a concept with significant pull, and the networks and communities around Ethereum are active, visible and persuasive.
That the top tier NFT collections operate on this blockchain and have enormous price tags denominated in ETH, which reflects well on Ethereum, while at the same time, rises in the price of ETH bump up those NFT price tags in dollar terms, returning in favor of NFTs.
Polygon
A developing trend that looks very likely to grow is the crossover between traditional brands and web2 platforms, on the one hand, NFTs, with web3 and crypto on the other. Of note, is that many of these traditional entrants into the crypto and NFT sphere are choosing to utilize Polygon, including the likes of Reddit, Instagram and Adobe.
Polygon is a Layer 2 scaling solution, operating as a sidechain alongside the Ethereum blockchain, and its native token is Matic. If current trends continue, then Polygon looks set to play an integral role in the crossover between crypto (or web3, as it will often be referred to), and traditional platforms and brands.
Solana
Due to its association with FTX, Alameda Research and Sam Bankman-Fried, Solana has taken a big price hit recently. However, several top Solana NFT collections have been performing well, as has the primary Solana-centered marketplace, Magic Eden, which is currently the second most-used NFT trading platform, after OpenSea.
Here, again, some NFTs appear capable of quick recoveries from market shocks, reinforcing the idea that they are operating on their own terms, regardless of blockchain. Additionally, there are several other networks that have resilient, expanding NFT communities, including the likes of Cardano and Avalanche.
Trends can shift rapidly, but NFTs leading a recovery across crypto, or simply branching off and performing uniquely, are both possibilities to consider.