The NFT market so far has been a wild ride, characterized by boom times of stratospheric growth and then crashes of equal magnitude. After a significant period of slumber, evidence to the contrary now indicates a possible resurgence—projects such as Doodles are paving the way. This post dives into what’s making the recovery look more rosy than it really is. It celebrates the new Doodle era and assesses if this is a sign of a real market recovery or simply a passing bubble. FearlessToken.com dives headfirst into an ongoing digital renaissance. It follows the fight for NFT royalties, showcases ambitious generative art, breaks down PFP project patterns, explains what’s going on in the metaverse, and brings you market data straight, no chaser. For the bold creatives building tomorrow’s new cultural frontier.

The NFT Market's Tumultuous Journey

As you may recall, the NFT market soared to astronomical heights, attracting investors, artists and collectors to the space. This explosive growth was met with an equally stunning correction. Chainalysis economist Ethan McMahon took a look at more than 15 million NFT transactions worth an estimated $18 billion from January 2021 to September 2022. He found that the NFT market actually did reflect a bubble. This assumption is bolstered somewhat by data indicating a staggering drop in transaction volume and price, across the board.

OpenSea, a popular NFT marketplace, recently reported a staggering 97% decline in transaction volume since its May 2021 heyday. Trading volumes across the NFT space plummeted by a shocking 97% from January to September of 2022. The average NFT prices sank, with NonFungible.com’s Q3 report estimating a loss of about 87%. Unlike the previous downturn, there was a sharp drop in consumer confidence. Active wallets are down nearly 50% since the market’s peak in January 2022. This creates the misleading impression that the market was overheated and was due for a correction.

The downturn exposed the dangers behind NFT purchases. These risks include volatility, illiquidity/lack of market depth and the ever-present threat of scams and fraud. Gupta (2021) mentions the susceptibility of the NFT market to scams and the creation and sale of counterfeit NFTs. Kshetri (2022) highlights the limited regulation within the NFT marketplace, which can leave investors exposed to risk. Despite these challenges, the underlying technology and the concept of digital ownership remain compelling, suggesting that the NFT market has the potential for future growth.

Doodles' Resurgence: A Case Study

All of this considered across the broader market sentiment, the Doodles project has proven incredible resilience. Doodles is known online for its colorful and inclusive community. Shortly after launching its $DOOD token, the project experienced a huge increase in price and trading volume. This surge raises the question: Is Doodles' performance indicative of a broader market recovery, or is it an isolated case driven by project-specific factors?

The launch of the $DOOD token represents a deepening of the Doodles experience. It provides true utility and governance rights for token holders. The initial response was mixed. Despite NFT sales tripling to 97% right before the airdrop, pushing sales over $1.1 million, the actual airdrop caused heavy sell pressure on OpenSea. As holders increasingly tried to cash out, it led to market capitalizations plummeting by almost 40% down to around $60 million. Indeed, the floor price of Doodles NFTs sank in the process from 3.5 ETH to 1.5 ETH, a fall of 60%. Their initial capitalization of $DOOD was more than $100 million. Their market cap immediately slashed down 40% the day after their launch.

After a very rocky start, Doodles appears to have developed a strong brand and internalized the crypto rollercoaster’s boom-or-bust nature. Other news sources even claim it has surged up to 500%. A combination of reasons have led to this rebound. The project’s passionate community, relentless innovation, and deep partnerships are equally important. The Doodles team has been putting in a lot of effort to broaden the project’s scope and usefulness. Their persistence has maintained a high level of interest and demand.

Factors Driving NFT Market Growth

There’s more brewing than just the Doodles case that would see the NFT market potentially return with a roar. Despite the turmoil that the market has experienced, we believe that the technology is still here and the applications are still compelling.

  • Integration with AI and the Metaverse: The combination of NFTs with AI and the metaverse is expected to play a significant role in the future of the NFT market. These integrations can create new and immersive experiences, driving demand for NFTs.
  • Utility-Driven NFTs: NFTs with utility, such as those used in loyalty programs, are becoming increasingly popular, and this trend is expected to continue. NFTs that offer tangible benefits beyond simple ownership are more likely to retain value and attract users.
  • Rising Demand for NFT Marketplaces: The demand for NFT marketplaces is on the rise, and new developments in this area are expected to drive growth in the NFT market. More user-friendly and efficient marketplaces can facilitate greater participation and liquidity.
  • Big Tech and NFT Adoption: Major companies, such as Salesforce, are integrating NFTs into their platforms, which is expected to drive adoption and growth in the NFT market. This mainstream adoption can provide credibility and exposure to the NFT space.
  • NFTs as a Backbone for Digital Ownership: NFTs are becoming a key component of digital ownership, and their use in various industries, such as gaming and real estate, is expected to continue. As more industries recognize the value of NFTs in representing ownership, the market is likely to expand.

These factors collectively point to the NFT market moving past speculative trading in search of more sustainable use cases.

Investment Opportunities and Risks

Whether you’re an artist, collector, or investor, there are new opportunities and risks of investing in NFTs. NFTs have the potential to appreciate exponentially in value over time. Together, this renders them a more attractive investment opportunity (Nadini et al., 2021). They provide a sustainable and green asset class for investors to include in diversified portfolios (Rehman et al., 2022). Sales in this new market skyrocketed to $25 billion in 2021 (Howcroft, 2022), making NFTs one of the fastest growing industries ever.

The NFT market is at high risk from scams and fraud. Counterfeit NFTs are so often created and sold that they represent a significant risk for NFT buyers (Gupta, 2021). The NFT market is wholly unregulated, making it more difficult for investors to make informed decisions. When disagreements or losses arise, the path to a remedy can be an enormous barrier.

Here are some steps investors can take to mitigate risks:

  1. Due Diligence: Research the project, its team, and its community before investing. Look for projects with a clear roadmap, a strong track record, and a dedicated community.
  2. Security: Use secure wallets and exchanges to protect your NFTs from theft or loss. Enable two-factor authentication and store your private keys offline.
  3. Diversification: Don't put all your eggs in one basket. Diversify your NFT portfolio across different projects and asset classes.
  4. Stay Informed: Keep up-to-date with the latest news and trends in the NFT market. This will help you make informed investment decisions and avoid potential scams.
  5. Risk Management: Only invest what you can afford to lose. The NFT market is highly volatile, and there is no guarantee of returns.

Conclusion

As we all know, the NFT market has been extremely volatile, going from explosive growth to a fast crash. Although projects like Doodles have withstood the tanking market, it is crucial to remain cautious given the current state of the market. After a long bear market, the NFT market is seeing signs of a comeback. Integration with AI and the metaverse, utility-focused NFTs, and adoption by the mainstream public are all helping move this space beyond speculative trading. However, investors should be aware of the risks involved, including scams, fraud, and lack of regulation, and take steps to mitigate these risks. The NFT market is changing by the day. The key is to be aware, do your diligence, and invest wisely.