NFT is back in vogue, with popular projects often sending buyers back into five figures or more.

Key Points

  • NFT avatar projects such as Bored Ape Yacht Club and Azuki have soared in value.
  • The renewed interest in NFT may be due to a lack of momentum in the broader cryptocurrency market.
  • Despite the gaming community’s opposition to NFT, marketplaces like OpenSea show no signs of slowing down in terms of user growth and transaction volumes.

NFT has become a hot asset in recent weeks. Floor prices for existing blue chip NFT projects have exploded, and values for new entrants are rising rapidly to meet them.

NFT Frenzy Continues

NFT is once again dominating the cryptocurrency space.

Since the beginning of the year, major cryptocurrency assets such as Bitcoin, Ether and Solana have trended lower due to concerns over the planned rise in the Federal Reserve and an unstable macroeconomic environment. However, not every cryptocurrency niche has been affected by the weak price action. NFT avatars are once again on the radar of collectors, leading to a spike in the value of top items.

Bored Ape Yacht Club, arguably the most prolific NFT avatar project thanks to its strong community, rich roadmap, and continued support from well-known celebrities, saw its base price rise 63% in January. Earlier this month, buyers could purchase an ape for 66 ETH. Now, the cheapest ape will set fans back more than 108 ETH (about $298,000). Over $229 million worth of Bored Apes were traded in the same period, ranking second among OpenSea's most traded collections.

Existing blue-chip projects aren't the only NFTs that have become popular recently. Several anime themed series have popped up and quickly joined the ranks of the most traded projects ever. Azuki, the community-oriented anime metaverse project, saw its base price soar from 1.9 ETH upon launch to a high of 18.27 ETH on February 1, an increase of 885%. Currently, Azuki is ranked #1 on OpenSea in terms of trading volume, with over $254 million in transactions over the past month.

Clone X #9877

CloneX #9877, recently sold for 175 ETH (source: CloneX)

On the back of Azuki's success, several other anime inspired projects soared to new highs. CloneX, a collaboration between virtual collectible creator RTFKT and Japanese artist Takashi Murakami in one incarnation, has seen its sales boosted by the current NFT market environment. CloneX NFT sold for about 2.95 ETH shortly after the project launched in early December. However, the cheapest piece is now priced at 17.2 ETH, partly due to speculation that CloneX holders will get first dibs on Murakami's next NFT collection, Murakami Flowers.

The current NFT bull market is reminiscent of the "NFT summer," with Bored Apes, CryptoPunks and hits from generative art like Tyler Hobbs' Fidenza and Dmitry Cherniak's Ringtone during August and September of last year. Interest in NFT avatar projects was also strong, with blue-chip projects like Cool Cats and CyberKongz building up during this period.

Spectators point to an inverse relationship between the price of top cryptocurrency assets such as bitcoin and ethereum and interest in NFT. The price lag during the NFT summer may encourage investors to view NFT as a lucrative short-term investment.

Moreover, since NFT is typically priced in Ether, a drop in the price of denominated assets may encourage investors to trade them for other uncorrelated assets with higher short-term upside potential, such as NFT. Given this historical precedent, it seems unsurprising that the value of NFT has spiked after Bitcoin and Ether prices hit nearly six-month lows.

Despite the current NFT mania sweeping the cryptocurrency space, there is still a continued negative attitude towards irreplaceable assets in other circles, especially in the gaming community. While some game companies such as Ubisoft have promised to incorporate NFT into their games, other studios have scrapped their NFT plans due to strong community opposition.

However, much of the skepticism about NFT stems from vague environmental issues and concerns about monetizing pay-to-play. While these issues seem to be serious in the gaming community, they have not stopped the adoption of NFT. The number of registered users trading on OpenSea continues to grow at a parabolic rate, recently surpassing 1 million in late January. Trading volume over the past month has likewise hit an all-time high, reaching a record $5.5 billion.

Although NFT experienced skyrocketing growth in 2021, current metrics suggest that there is still plenty of room for growth in the market this year. Time will tell if the current interest in NFT incarnations will spill over into other areas such as gaming.

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