What the data means for brands
While slumping prices are never a good sign, brands should understand that the most dramatic drops for NFTs are reflected in terms of U.S. dollars as opposed to cryptocurrency. The crypto market has experienced its own massive volatility as of late, and this has ultimately been factored into NFT data since most digital tokens are bought with crypto. The result is a ubiquitous lack of clarity on how much NFTs have lost in real value versus nominal value. For example, an NFT sold for 3 ETH on Jan. 19 equaled just over $9,000, but if that same NFT was sold for 3 ETH on May 19, it was worth only $6,000—a 33% drop in nominal value.
What this means is that trading volume is not the best indicator of NFT demand. Instead, the key metric brands should be paying attention to is the number of active wallets, said Messari’s Nystrom. This number roughly translates to the number of active buyers in the NFT space, although numerous wallets could belong to a single buyer.
On a weekly basis, the present number of active buyers is similar to levels seen in mid-December, with roughly 112,000, according to Dune. Monthly numbers for the entirety of April were even higher than those of December, with over 350,000 buyers.
As for metaverse land NFTs, the number of active buyers on The Sandbox dropped roughly 47% in the first quarter of 2022, per Messari data. This slowdown has also impacted the secondary market, where the number of buyers has decreased by 54% compared to the previous quarter.
Read more: Metaverse glossary for brands
These drops reflect more of a correction from an overly strong boom period than a red flag, said Nystrom. During the fourth quarter of 2021, buyers flocked to purchase land in The Sandbox and other virtual real estate platforms, many in response to Meta’s re-brand in late October—a landmark moment in the validation of and investment in the metaverse.
The Sandbox is also still in alpha testing, and brands and creators cannot yet launch experiences for users. Demand in its real estate and experiences will be more accurately reflected once the platform opens up to the public.
Another takeaway for brands is that NFTs that depend less on speculative investing—and, thus, less on volatile market conditions—may find the most success with consumers, said Kai Tier, VP of technology at marketing company R/GA.
Utility-focused NFTs offer special perks through ownership, such as access to promotions and real-world experiences, and have been launched by brands with committed Web3 strategies, like Adidas and Bud Light Next. The brewer, for example, deploys ticket giveaways through its Discord channel in an effort to keep holders of its Next NFT engaged, despite poor market conditions.
“For [brands] who are looking to actually offer value to consumers, the risk in terms of the slowdown isn’t necessarily there,” Tier said.
Credit: Source link