The Non-Fungible Token (NFT) trading volume has dropped, according to a recent CoinGecko analysis, from $26.3 billion in 2022 to a meager $11.8 billion in 2023. For a once-thriving market that attracted the interest of cryptocurrency aficionados worldwide, this fall represents a turning point.

A Slow Burn: The Decline of Digital Art

Two years ago, pixelated collectibles—typified by companies like Bored Ape Yacht Club—were selling for millions of dollars and were even featured on well-known shows like The Tonight Show with Jimmy Fallon. As demonstrated by CoinGecko’s 2022 report, which shows consecutive quarterly reductions in volume reaching over $10 billion from Q1 to Q4, the decline in the digital art market has, nevertheless, been a steady process.

The prolonged decline in the NFT market can be linked to weak macroeconomic circumstances and well-publicized failures that caused investors and the general public to lose faith in the unstable cryptocurrency industry. These elements, according to Rohan Handa, NFT lead at Mysten Labs, are major causes of the protracted decline in the NFT market.

OpenSea’s Challenges: Mirror Market Illnesses

After peaking at a valuation of an astounding $13.3 billion, OpenSea’s trading volume fell precipitously, reaching just about $170 million by the end of 2023. The platform had to fire 50% of its employees in November after seeing monthly volumes surpass $2 billion in 2021 and 2022. Furthermore, it is stated that Coatue Management, an investment supporter, reduced its ownership stake in the company by 90%.

OpenSea CEO Devin Finzer is upbeat about the future despite the obstacles, hinting at upcoming improvements with “OpenSea 2.0.” The platform streamlined the NFT buying and selling process and attracted new users by introducing a simplified wallet setup onramp that only requires an email.

NFTs See a Comeback Apart from JPEGs

For NFT aficionados, there is hope despite the present slowdown. In the latter part of 2023 and the beginning of 2024, there were indications of a recovery, partly due to the increase in Bitcoin Ordinal inscriptions and the enthusiasm around the Solana ecosystem.

The consensus among experts and industry participants is that NFTs will play a bigger role in the future than just trading collectible JPEGs. According to Rohan Handa of Mysten Labs, the initial rise in 2021 was regarded as “step 1 in onboarding non-crypto native users.” The market is currently transitioning from speculative trading to real-life applications as it enters the second stage of maturity.

NFTs’ Future: Financial Incentivization, Gamification, and Utility

Industry insiders stress the significance of combining NFTs with utility, gamification, and financial incentivization in order to revitalize the NFT business. According to Dirk Leuth, co-founder of Upland, a metaverse gaming platform, the oversaturation of the industry is a result of basic use cases such as digital collectibles and profile photographs (PFPs). The next step is incorporating NFTs into practical uses like access control, reward programs, and identity verification for governance.

NFTs in Gaming: A Glimmer of Hope for 2024

The future of NFTs in gaming is bright; analysts have dubbed 2024 the “year of gaming NFTs.” Games built on the blockchain that let players exchange in-game items and characters for NFTs are anticipated to make a big impact on the market’s comeback. This specific NFT application is expected to increase significantly in the upcoming years, according to an S&P report, demonstrating how NFTs have the ability to completely transform the gaming sector.

Snapshot of the User-shortest ChatGPT NFT Market: CoinGecko Reports $14.5B Drop in 2023

According to CoinGecko, NFT trade volume plummeted from $26.3 billion in 2022 to $11.8 billion in 2023. Macroeconomic factors and high-profile failures, which impacted platforms like OpenSea and resulted in staff layoffs and a significant decline in trade volume, were to blame for the lack of confidence.

Through “OpenSea 2.0” renovations and streamlined onramps, OpenSea hopes to recover. Despite the decline, excitement over Solana and Bitcoin Ordinal inscriptions caused signs of a recovery to emerge in late-2023.

In the NFT realm, it’s widely agreed that collectible JPEGs are no longer the norm. A second phase that focuses on gamification, financial incentivization, and utility is what experts envision. Gaming NFTs are expected to be a major factor in the market’s recovery, especially in 2024.