Trading volumes beyond various verticals of nonfungible tokens (NFTs) accept been on a tear this year.

Combined sales for collectible and art NFTs have reached $7.4 billion equally of Q4 2022. The art NFT market has grown from $17.eight million on January i to $i.eight billion in full sales every bit of Nov. five, 2022. At the showtime of 2022, the collectible NFT market place started with a full sales book of $55.5 meg. It has since ballooned to $5.half-dozen billion. As reported past Reuters, total NFT sales volumes jumped from $one.3 billion in Q2 to $ten.vii billion in Q3.

Record sales like that of the rare Bored Ape Yacht Club NFT, which went for a tape $three.4 million on Oct. 26, puts the frenzy of the NFT market into more context. The sale closed on Sotheby's online fine art sale platform Metaverse. The last record auction of a Bored Ape Yacht Gild NFT happened in September, closing at $two.nine one thousand thousand. The October. 26 tape took place in tandem with another expectation-beating auction the same day in which a Bored Ape Yacht Society NFT drove auction of 101 pieces sold for $24.39 million.

The Bored Ape Yacht Club NFT art series, which launched in April 2022, has accumulated almost $1 billion in total sales this yr, according to DappRadar. Sotheby's first auction of NFT artist Pak fetched $xvi.viii million in April as well, and Christie's followed with an NFT slice past creative person Beeple for $69 million.

"What we are seeing with NFTs is the emergence of an entirely new audience of traders into the space, driven by perhaps the most friendly on-ramp to crypto ever seen," Pedro Herrera, senior blockchain analyst at DappRadar, told Cointelegraph.

The "hype machine" is real

In April, the art and data science web log Artnome highlighted the correlation between the number of views past registered collectors on SuperRare and an NFT'due south sale price on the platform. The authors concluded that "the hype motorcar is real," every bit data showed that the number of views by registered collectors of a piece of work correlated to a higher sales price for the NFT.

At that place were two surges in the market this yr that also coincided with solid spikes in net searches for the term "NFT." The offset happened after the highest-paid price for an NFT — Beeple's $69 million auction of his photo collage "Everydays: The First 5,000 Days" — was sold through Christie'south online auction site on March 11. It was the showtime NFT ever to be auctioned at a major fine art auction house, and the hype poured fuel on the marketplace. The total monthly sales volume in the art NFT market surged from $32 1000000 on March 1 to $83 one thousand thousand by April 1.

The second surge came on July 31, when sales in the collectible NFT market increased from $1.2 billion in full all-fourth dimension yearly sales to $iv.65 billion by Sept. 30. The peak of the "NFT" search term coincided with 2 of the most popular AI-generated collections, CryptoPunks and the Bored Ape Yacht Club, beginning to dominate the crypto fine art market.

Concentrated ownership

In a May 2022 New York Times op-ed, Hungarian network scientist Albert-László Barabási described his analysis of transactions that took place on the SuperRare crypto art NFT marketplace platform.

In the analysis, Barabási examined the number of co-owned art NFT transactions between collectors on the platform. He defined co-owned art NFTs as art NFTs that had been bought and sold between more than one collector through SuperRare. He analyzed each artwork as a "node" on a "network" of transactions between registered SuperRare collectors to see how many of the same pieces had been owned by dissimilar collectors.

His reasoning was that fine art collectors typically collect and trade in one type of art, whether a particular creative person, mode, genre or medium. Therefore, he hypothesized that in that location were only a small group of collectors making the purchases of the loftier-terminate fine art NFTs.

As it turns out, he was right. Barabási institute that a group of iv collectors endemic most of the works with just iii degrees of separation between any i of them and the xvi,000 works of art they collected.

In a written report released by crypto analytics firm Moonstream that analyzed transactions on the Ethereum blockchain between Apr and the finish of September, the authors establish that there is great inequality in the Ethereum NFT marketplace, with the top 16.71% of NFT owners decision-making 80.98% of the NFTs.

Furthermore, almost of those purchases are for NFTs with more extrinsic than intrinsic utility — think utility tokens like name service NFTs — that have a common functionality on-chain versus rare CryptoPunks collectible NFTs going for seven figures.

The report also discovered that 83.29% of the addresses which causeless ownership of an NFT, did so for less than x Ether (ETH).

Even though the Moonstream data looks at the broader NFT market, it seems to support Barabási'southward analysis that, for the college-end, intrinsically-valued crypto art market, there is a pocket-size, tight lodge of whales who own the majority of the NFTs. Many of these owners are collectors and marketplaces. But, the report also noted that the barrier to entry for the NFT market place is low, and disbursement of NFT ownership is correlated to the level of extrinsic utility of the NFT.

In a poll conducted past The Harris Poll and Adweek in April, xl% of the 1,088 participants surveyed said they were "familiar" with NFTs and 81% said they were aware of NFTs.

"Overall, not many Americans have jumped on the NFT bandwagon even so — only 12% of respondents said they've invested in the digital collectibles. Only among millennials, that number's a bit higher: 27% say they're currently investing in NFTs. Millennials are also the well-nigh likely cohort to invest in cryptocurrencies at 37%," according to the poll.

"Predictably, those who consider themselves 'collectors' are also more probable to want a slice of the shiny new digital collectible pie. For overall collectors, 22% said they own NFTs, and for collectors with more than than $100,000 in annual income, that jumps to 33%."

As conveyed in the Hiscox Online Art Trade Study for 2022, the current situation in the market has become difficult for many art veterans to empathize due to the current values of CryptoPunks and Bored Ape Yacht Club pieces at auction. Many exercise not know what's hype and what is not. Perceptions are irresolute, though. The study'southward survey of art sale houses and online websites found that 14% of art marketplace platforms already offer NFTs for auction on their platforms, with another 38% surveyed stating that they are planning to do and then soon.

According to the written report, in that location is speculation that the traditional and crypto art markets could merge into a permanent hybrid experience where physical art galleries showcase crypto art and traditional artworks are digitized and sold online. This yr, at least iv of the nearly expensive crypto art sales took place on traditional online art sale platforms.

Bobby Ong, co-founder and primary operating officer of CoinGecko, told Cointelegraph:

"Perhaps one of the biggest signs of traditional art collectors entering the NFT market place is the fact that traditional sale houses like Christie's and Sotheby's are conducting NFT auctions and bridging the gap between NFTs and art collectors."

Besides the pandemic, the report highlighted two instigating factors fueling the proliferation of the crypto art market in 2022. Outset, two of the major traditional fine art auction houses, Christie's and Sotheby's, began accepting cryptocurrency as a class of payment. The use of cryptocurrency as payment was a manner for the ii auction houses to concenter and cater to wealthy crypto investors.

Secondly, NFTs provide artists with a public ledger that creates proof of title and authenticity for their work. Besides protecting confronting theft and forgery, this allows artists to collect royalties in the secondary NFT art market.

Will digital art go mainstream?

With private CryptoPunk NFTs going for seven-figure toll tags, what will it take for the art and collectible NFT markets to go mainstream?

In the April 2022 post on Artnome, the authors stated i of crypto fine art'south greatest achievements so far has been to "puncture the illusion of contemporary art as a space for 'high' culture." The authors likewise voiced their intention "to point a mode across the current situation, in which speculation appears to exist every bit much a driver of art's value as the works themselves."

As DappRadar's Herrara said, "It'south important to draw lines between different types of NFTs. Sure, a CryptoPunk is now the equivalent of a Picasso. Therefore information technology'south exterior most people'due south financial reach. However, new and exciting collections, with the potential to become equally valuable as CryptoPunks make it daily with price tags under $400. So bluntly, you don't need millions in your wallet to get involved."