Digital collectibles market is segmented based on product (music collectibles and art collectibles), sales channel (Licensed Collectible Manufacturers, Specialized Collectibles Marketplace and E-commerce Portals) and Country (United States as major market and 20 countries analysed per category)
Digital Collectibles (NFT) market size was estimated at $20.8 billion in 2020 and is expected to grow at a CAGR of 11.9% during the forecast period of 2021 to 2031.
Digital collectibles are transacted through blockchain based NFTs and therefore are also known as NFT Collectibles Market. Non Fungible Tokens or NFTs make use of blockchain technology to commemorate the ownership of digital collectibles. This includes videos, images, and other forms of collectibles. NFTs have been considered as a worthwhile investment for collectors, where they get the ownership of digital assets with zero or minimal documentation. The high demand for digital assets has pushed up the prices of NFTs, with a sudden surge in the NFT markets.
Boom in NFT market with market cap growing by 1,785 % in 2021
Major NFT Tokens witnessed a 1785% of market Cap growth in three months from Janurary to March in 2021. The digital collectible market is on the boom. The first half of 2021 witnessed $2.5 billion dollars of sales. It is not only impressive but remarkable considering the economic slowdown in the post-pandemic era. The buyers who were interested in the digital collectibles ranged from Hollywood celebrities to institutional buyers. While a sizeable contribution was made by the small retail buyers. The participation from different sectors has gradually pushed the volume of the NFTs or Non Fungible Tokens. The NFT market has been quite active since last year. However, the biggest growth was witnessed in the first quarter of this year. There was an increase of 43% in the volume, in June 2021.
One of the key reasons behind the growth of NFTs is easy accessibility to trade. One can easily buy and sell NFTs online, sitting anywhere in the world. NFTs are distinct and that is why they have become one most traded digital instruments. The Q3 of 2021 saw an overall sales of $10.7 Billion USDs which was itself a new high in the crypto frenzy market. It was a huge transition from Q1 and Q2. In Q1, the sales figure of NFTs stood at $1.2 Billion, and the same for Q2 was $1.3 Billion. OpenSea which is one of the biggest marketplaces for NFTs registered a sales volume of $3.4 Billion in August, and it exceeded that volume in September. Market analysts have maintained that strong growth in the crypto market in the pandemic era has driven the growth of the NFT market. The busiest blockchain platform used for trading has been Ethereum. In 2021, the volume of NFT trading on Ethereum stood at $7 billion. The most expensive sale of the year was a digital collage sold at a whopping price of $69.3 million, at Christies. Christies is one of the leading business houses that participates in the trading of digital collectibles. Apart from Christies, Art Blocks which is a US-based firm was also engaged in high-volume NFT trading. Art Blocks specializes in algorithmically generated digital artworks. Both Christies & Art Blocks did the maximum trading of NFTs on the Ethereum platform. The highest sales volume of NFTs was recorded by Bored Ape Yacht Club selling over 68,000 digital collectibles, worth over $1 billion. It was followed by CryptoPunks, Sandbox, and SuperRare. All these NFT traders traded on the Ethereum platform.
The growth in the NFTs have also resulted in the growth of the NFT wallets. NFT wallets are used for storing both, NFTs as well as for cryptocurrencies. The number of NFT wallets has surged over close to 1,85,000. Out of that 1,75,000 exist on the Ethereum platform. This is not a surprising fact as most of the trading platforms use Ether as a cryptocurrency for trading. One of the key reasons for the growth of NFT wallets is using NFTs as an investment for the future.
Risk and challenges in the Digital Collectibles NFT market
Even though wallets have increased, the number of active NFT wallets has decreased. The drop in active wallet was over 40 percent in the quarter beginning with June. Though there has been some recovery, it is not remarkable. One of the key reasons behind this is the drop in retail investors and small traders, while most of the trading is being done by the institutional investors and big traders, with the higher volume of transactions. Even though active wallets have decreased, the high sale volumes by the institutional investors have managed to keep overall sale volume high. However, a bigger challenge might come up in the future where the retail investors will gradually vanish from the NFT markets, and it will be completely regulated by the institutional investors. Something which we can relate to the modern-day money market.
Another key challenge is the lack of regulations in the NFT trading space, as there is no centralized marketplace. This is one of the key reasons, why trading is done on different blockchain platforms instead of one specific platform. For small investors, this is a problem because they need to maintain different wallets based on different blockchain platforms. For example, if someone has bought an NFT asset using Ether, then he cannot sell it in Flow if he doesn’t have a wallet in Flow. Thus, these wallets are not interoperable, and each of them operates only with their native blockchain platforms. This problem will become more complex as more competitors will enter the market, and introduce their wallets.
Since regulatory measures are not present in the NFT marketplace, there are high chances of market frauds using blockchain. Blockchain itself is a secure technology for authentication, but definitely, this becomes its biggest flaw when it comes to trading between different platforms. If the passwords or the private identifiers are lost, the assets associated with them will be lost forever. This is the biggest risk on the blockchain platform as of today.
Current buying trends in the NFT Collectibles market
One of the trending buys in NFT space is membership of Bored Ape Yacht Club, where NFTs depicting apes are being sold to the members. These Apes are auctioned by Sotheby. It is closely followed by Cryptopunks, which has 10000 unique collectible characters for sale in form of NFTs. Buyers use these collectibles in a different format, such as brand logos, Twitter profiles, posters, etc. Another trending NFT is EtherRocks, which depicts the images of rocks in different art forms. These rock arts are expensive, and currently, it is being sold for over $100,000 per NFT.
In the current market, Visa and Budweiser have become the two largest investors, investing in buying NFTs for their business. In the market trends, Gaming NFTs are gradually trending with Axie Infinity leading the pack. It is a crypto game, where the players are rewarded with crypto tokens.
Digital Collectibles NFT Market Segment Revenue Breakdown
Analysis by Product (Revenue, USD Million, 2020 to 2031)
Analysis by Sales Channel (Revenue, USD Million, 2020 to 2031)
Analysis by Country (Revenue, USD Million, 2020 to 2031)
Company Profiles (NFT and Potential Strong Players to enter the market)
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