Is The Bull Market Back?
Breaking down the differences in the NFT market in 2023 vs 2021...
In today’s edition of The Ground Floor we are breaking down the differences in the NFT market in 2023 vs 2021...
Is The Bull Market Back?
“Always has been by Jack Butcher”
Crypto is an industry subject to cycles.
This week, it would have been all but impossible to spend time on Twitter without seeing a long list of people proclaiming the return of a bull market.
While it’s unclear if this positive sentiment will sustain long enough for the people preaching these proclamations to be proven correct ~ one thing that is clear is that the NFT market has come a long way since the last bull market.
One of the biggest improvements in the NFT market since 2021 has been the remarkable rise in more readily scalable infrastructure.
In 2021, Ethereum frequently experienced network congestion, resulting in users all too often having to pay $100+ in transaction fees.
In the last two years, we have seen the successful launch, and increased adoption of new layer-2 solutions such as Polygon, and Base that have reduced gas fees by as much as 95%, with improved transaction speeds.
This much needed infrastructure upgrade has effectively eradicated one of the biggest points of friction for users seeking to engage in on-chain activities.
In the prior bull market in 2021, nascent narratives such as projects “becoming the next Disney” were widely used to entice people to participate in projects.
In the time since, it has become abundantly clear that 99% of the projects that raised capital from their community during this time with such aspirations are simply incapable of guiding their projects in the right direction.
Fortunately for this space, this number is not 100% as 1% of these projects have made massive moves to achieve commercial success with Pudgy Penguins partnership with Walmart and Doodles opening their own retail store.
These success stories have permanently raised the bar for every project in this space, and provide a clear pathway for projects to achieve commercial success without having to release new collections to support their initiatives.
Pudgy Penguins (L) / Doodles x Camp (R)
Sustainable Use Cases
In 2021, the primary focus of NFT projects revolved around the idea of building products that resulted in the mass adoption of NFTs.
As we've discussed in previous editions of The Ground Floor, the undeniable killer application for NFTs in 2023 is digital artwork, and while digital artwork isn’t likely to serve as the singular catalyst to onboard the masses to NFTs, a crucial distinction lies in the sustainability of this use case compared to the multitude of projects that pledged to onboard the masses in 2021.
Those projects aiming for mass adoption in 2021 that delivered cartoon profile pictures often lost their appeal within a week, as the initial hype surrounding these endeavors waned.
Undoubtedly, there will be digital art projects that find favor, only to fade from the limelight a few weeks later, however, there is a growing community of collectors who possess a genuine passion for acquiring digital artwork, and holding these pieces over extended periods, in contrast to those who merely aimed to quickly flip profile picture (PFP) projects for short-term gains.
The bull market of 2021 attracted many opportunistic individuals to this space who faced little friction in launching projects that promised the world, and subsequently delivered little, to no value to token holders.
While history might repeat itself in another bull market, new narratives, such as Web3 gaming, and new digital art collections are likely to capture a significant share of new capital, signaling a much needed maturing of this market.
Combined with lower transaction fees, actual examples of projects achieving commercial success, and sustainable use cases for digital collectibles, there undoubtedly remains reasons to be excited about the future adoption of NFTs.
💡 Web3 Roundup
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See you next time! — Matt O’Brien 👋
This newsletter is for informational purposes only and does not constitute financial or business advice to any person or entity