The NFT market is probably not as down as you think it is

May 5, 2022, 5:32 PM UTC

Is the NFT market “collapsing”? 

A recent report citing data from an NFT market metrics website called said as much, but not everyone agrees.

The data was immediately met with skepticism from crypto Twitter

NonFungible responded to the backlash, saying on Twitter that the data is “conservative.” 

“[T]he market cannot really be considered to have collapsed,” NonFungible tweeted on Wednesday. “We are observing a stabilization of the NFT market, in line with the last quarter of 2021.… But compared to Q1 2021, [active wallet] volume is still very encouraging!”

Gauthier Zuppinger, chief operating officer for NonFungible, told Fortune in an email that “in no way did the site come to the conclusion that the market was ‘collapsing,’” and there had been a “misunderstanding in the analysis of our data.” Zuppinger clarified that NonFungible’s data has been “syncing and backfilling gradually.” Now its data is fully up to date, Zuppinger said.

The NFT market did cool off in the first quarter of 2022. But different market data from other sources, including NFT ranking platform DappRadar and blockchain analysis platforms Nansen and Dune Analytics, show that sales volume and active user counts aren’t flatlining.

And a new report from Chainalysis published on Thursday morning shows that NFT activity has stabilized in 2022, but NFT transaction volume continues to grow, despite fluctuating month to month.

“The purported decline in the NFT market is actually something that we…don’t agree with,” Ethan McMahon, economist at Chainalysis, told Fortune. He added that the claim of NFT sales “flatlining” isn’t a “fair statement.” In fact, he thinks that the market is “looking up.” 

So, what’s going on with the NFT market? Here’s what experts say.

The state of the NFT market

There’s no doubt that NFTs had a rough start to this year.

In mid-February, total NFT transaction activity dropped from $3.9 billion the week of Feb. 13 to $964 million the week of March 13, according to a new report from Chainalysis. That’s the lowest weekly level of total NFT transaction activity since the week of Aug. 1, 2021. 

But the NFT market has shown signs of recovery since mid-April, according to the report. Overall, more than $37 billion has been sent by cryptocurrency wallets to NFT marketplaces in 2022 as of May 1. That’s nearly caught up to last year’s total of $40 billion sent in 2021.

That huge spike in activity was largely due to popular NFT projects like Moonbirds, a collection of 10,000 pixelated owls that pulled in over $500 million in sales volume, and Otherdeeds, the Bored Ape Yacht Club metaverse land NFTs, that pulled in more than $700 million, Modesta Masoit, finance director at DappRadar, told Fortune. “The success shows the craze is not over,” she said.

McMahon agrees that these sales indicate a “resurgence” of interest in the space, even if a seemingly small group of NFT projects are driving sales. 

“It’s still a very new market, so you’re going to have some volatile periods,” McMahon said. “We will see blips and periods of times where NFTs slow down.”

Value sent to NFT platforms: Chainalysis
Courtesy of Chainalysis

Signs of growth in the NFT market

There are also signs that the market is getting bigger. The number of active NFT buyers and sellers is growing, according to Chainalysis’ new report.

Number of active NFT buyers and sellers: Chainalysis
Courtesy of Chainalysis

In the first quarter of this year, 950,000 unique cryptocurrency wallet addresses, which represent users conducting transactions, bought or sold an NFT, Chainalysis found. That’s up from 627,000 in the fourth quarter of 2020. 

Though the stat analyzes unique addresses, a lot of wash trading happens with NFTs, which is important to remember when looking through the numbers. Wash trading is when a seller is on both sides of a transaction, so as to create an artificially high value for an asset. 

Nonetheless, the number of active NFT buyers and sellers has increased each quarter since Q2 of 2020, according to the report.

It appears that this quarter is on pace to continue that streak. As of May 1, around 491,000 addresses have bought or sold NFTs in the second quarter of 2022, which could easily top first-quarter numbers, according to the report.  

“We seem to be, once again, on an uptick,” McMahon said.

The number of active NFT collections on OpenSea, one of the largest token marketplaces, has also grown consistently since March 2021, according to the report. It’s “another positive sign that things aren’t slowing down,” McMahon said.

Weekly number of OpenSea activity: Chainalysis
Courtesy of Chainalysis

The data by NonFungible that caused a bit of confusion can be explained, experts say.

The company noted in a Wednesday Twitter thread that it doesn’t track all blockchains and tokens that support NFTs, which could contribute to its data being different from other sources. 

“[E]xamining the health of the NFT market needs to be looked at holistically to include the number of NFT transactions, users, buyers, sales volume, and marketplaces across multiple blockchains,” Mason Nystrom, senior research analyst at Messari, a crypto market intelligence firm, told Fortune. “By examining some other sources, it becomes clear that the NFT market is not in a slump, but is in fact performing very well.”

The NonFungible data also didn’t include the Otherdeeds NFT land sale by Yugalabs as of Thursday morning, which would add more than $300 million into the mix of NFT sales volume. 

“ can be slower than other platforms listing new NFT collections,” Masoit said. 

NonFungible said Wednesday that it will reflect the data from Otherside “moving forward.” 

Entering a “maturity stage”?

In 2021, a ton of NFT projects came to market, Masoit said. Some were successful; others not so much. 

“Some investors got burnt and left, while others stayed and learned.” 

But in 2022, NFT trading volumes were mostly generated from the established “blue-chip” projects, like CryptoPunks and Bored Ape Yacht Club and its related projects, Masoit explains. 

Because of this shift, “NFTs look to be entering perhaps one of many maturity stages,” she said. “We expected this and believe it’s a normal development in such technology.” 

May 7, 2022: This article was updated with comment from NonFungible.

Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.