NFT prices are continuing on an upward trend, with yesterday marking their highest volume day in the past three months.
An episode of The Simpsons prominently featured NFTs and sent a jolt through the market, driving a wave of derivative projects. CryptoPunks are holding above $90,000, possibly inspired by the news that BAYC co-founder GordonGoner has bought a zombie with a knitted cap for 600 ETH.
Classic mid-cap collections from 2021 and 2022 are also benefiting, such as Goblintown (up 41%) and Cool Cats (up 55%). The PFP-focused rally has not necessarily translated for fine art collections, with Tyler Hobbs’ Fidenzas and William Mapan’s Anticyclone holding roughly steady.
Why the sudden surge?
Why is it happening? Speculation and FOMO? The Simpsons?
“Every NFT that is rallying seems to have a different driver,” says NFTStats, director of research at PROOF. “My sense is that after the success of $MEME by Memeland and the team at 9Gag, there is excitement about other potential gaming plays with tokens like The-Grapes or Mocaverse. Some on-chain plays like OnChainMonkey and Cyberbrokers have rallied since Elon comments about things being on-chain. A few older memes like Toadz and SupDucks are rallying. The other thing is that as projects get more volume, they become more attractive targets both for Blur farmers and Flooring Labs, which can bring more traders in,” he says.
Sergito, Punk and senior director at Fireblocks, thinks the rally is straightforward. “From a macro perspective, the upcoming recession has been well telegraphed, and so the market is now expecting financial conditions to be loosened by the authorities in order to combat that in 2024,” he told nft now. “Markets trade-off expectations, so a recession is actually potentially good for risk assets due to the expected response. Wild, I know. As it pertains to NFTs, we’ve seen liquidity flow from spot crypto into jpegs, as is usually the case. With the demise of SocialFI and the end of season 2 of Blur farming, the attention has returned to trading NFTs,” he says.
All that said, the mainstream notion that “NFTs are dead” has proven incredibly misguided; although VC investment has been drastically reduced since the days of the bull, companies that have survived the crypto winter and new innovators are coming up with meaningful uses of NFT technology, pinning their hopes on mass adoption—not floor price.
Shortly before the recent rally, Juan Redondo Cánovas del Castillo, a World Economic Forum fellow for blockchain and digital assets and associate partner at Bain & Company, published an Insight Report on the Evolution of Non-Fungible Tokens, commissioned by Bain and the World Economic Forum to look at NFT technology, the challenges to widespread adoption of NFTs, and what steps builders can take to make that happen.
The report briefly traces the history of the technology, including the 2021 boom that brought so many of us to space—but its focus is not on the dazzling variety of art, digital identities, and collectibles that brought so many of us to space. Rather, it goes into the applications that interest business and industry—everything from ticketing to financial services to the authentication of digital goods—laying them out in a clear, structured format, going into ten different use cases for the tech.
These run the gamut—Starbucks rolling out its loyalty program on Polygon, collections launching from Puma and Budweiser, and financial services using NFTs to structure loans and luxury brands certifying physical assets.
“The WEF report is a 30k-foot view of tokenized assets,” says Sergito. “I think people within the space sometimes are very narrow-minded in their view that “NFTs” refer to the tokens that have been trading for the last two years. The reality, though, is that NFTs are file formats that enable digital asset ownership, and thus there will be many industrial and commercial cases for NFTs which are not related to the JPEGs we love,” he says.
The report is a useful tool for advocates: across the board, many more big firms continued to develop their crypto and NFT plans than one would expect, given mainstream doomsayers. But it also warns of problems that must be overcome for NFTs to flourish and grow. These include issues of interoperability—no matter how we like to champion our favorite blockchains, ease of transfer between networks and platforms will build growth.
Regulatory clarity is also a must: the report says that IP rights protection, clear regulations, anti-money laundering compliance on all platforms, support for data privacy, and tax compliance tools are the minimum needed for mass adoption.
So—is the report bullish? “The most important takeaway is that the world is noticing our technology. The narrative that NFTs were dead because floor prices had fallen 90% was wrong. NFTs are seeing increased adoption from traditional companies and industries. These entities move at a much slower rate, but they are definitely exploring the technology, and that is good for the digital asset space,” says Sergito.