NFT cycle rotation: wild, bubble and value return
Key Takeaway
first level title
The NFT trading volume cycle has the characteristics of "hot spot detonation", "from large to small", and "continuity". At present, the market is in the extension wave of a large cycle.
The development stage of NFT has shifted from "mass media" to "community communication", and its hype cycle presents "plate rotation".
At present, the NFT market is in the transitional stage of "Expectation Expansion Period" and "Bubble Burst Period", which is similar to the traditional encryption market, but there are also differences. Events and prices are strongly correlated.
The NFT market will inevitably be affected by the overall encryption market, but at the same time the NFT market is more "slow" than it. When the market fluctuates greatly, the NFT market often does not respond quickly. As the market value of Ethereum continued to fall, the market value of NFT did not directly follow the decline.
Chain games, DAO, derivatives and other sub-industries combined with NFT have entered different stages of independent development.
From a macro point of view, this is the only way for an emerging product to be born: from being unknown to being sought after by everyone, NFT has gone through the process of "zero value" to "bubble", and finally returns to the value that suits itself. The value of positioning has become a product of the actual use of Web3.
first level title
Like the traditional stock market, the NFT market is still cyclical in the short term while the overall market value is rising. One is the "hot cycle" that is mainly presented by transaction volume, and the other is the "hype cycle" that is represented by the price curve cycle of blue-chip projects.
secondary title
heat cycleWhen the topic of NFT began to rise, the overall trading volume of the NFT market also began to gradually increase, and the two trends showed a strong correlation on the timeline. Combining the two trends, we can judge:This is the first time when the popularity of NFT is heating up. During this period, the amplitude is small and the time is short, which paves the way for the subsequent outbreak; January-February 2022 is the second period of NFT's popularity, and the transaction volume is 5 times higher than before. times as much, and the impact lasts longer. What laws are included in this?
2021-2022 Global Google Search NFT Trends; Data Source: Googletrends
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2021-2022 NFT market trading volume; data source: NFTGo.io
Combined with the figure below, let's dig out the characteristics of the small cycle of trading volume from July to September 2021.The opening of the first cycle requires a"tipping point", this is often a certain event that drives the topic, and then enters the "1" stage, starting the first wave of upsurge, and constantly hitting the peak transaction volume; and then due to the continuation effect, it causes the "2" stage, the peak transaction volume gradually shrinks, and finally tends to gentle. This is a small heat cycle that hasThree characteristics.
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2021-2022 NFT Market Trading Volume (Source: NFTGo.io)From the above point of view, the current NFT market still inherits the genes of the encrypted market. The following figure shows the total market value of the encrypted market in a period from 2017 to 2018. We can find the previous three characteristics. At the same time, we can see that in 2017 After the trend started in November, it caused three waves from big to small. This is also the difference between the big cycle and the small cycle.Higher peaks lead to more extended wavesAt present, the NFT market is still in the extension wave of the big cycle that started in January this year.
Encrypted total trading volume from May 17 to September 2018 (source: CMC)
secondary title
development stageEvery time the market "tipping point" is related to "Hype", we divide the dissemination stages of NFT into:Mass Media Communication and Community Communication Hype
. The upsurge of NFT is also inseparable from the promotion of the media, and is related to the attribute of the original "art collection".
Promoted by hot eventsArt NFT is very in line with the Hype cycle. In March last year, the NFT created by the artist Beeple was sold for more than 60 million US dollars, which immediately attracted the interest of the mass media in the NFT industry. Through media dissemination, it prompted the emergence of other art NFTs in the market during the same periodprice increase. Later, the participation of celebrities such as Takashi Murakami and Snoop Dogg directly turned NFT intoThe new darling of NFT, successfully "detonated" the NFT market for the first time through hot events.
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Beeple's "Astronomical" Works and CryptoPunks
Community and Trendy Consumption PowerAfter the emergence of PFP projects led by Cryptopunks and BAYC, the communication cycle has a corresponding dividing line-the concept of community clubs began to spread, and the resulting upsurge of PFP project issuance divided people into various community camps. In the cellular network, everyone is a transmission point, and the hype stage slowly turns intocommunity spreading hype
, The information distribution channel has also changed from "top-down" to "bottom-up", which has caused the phenomenon that celebrities and big Vs are rushing to buy NFT under the trend of NFT consumption. As a result, trading volumes in the NFT market broke new highs for the first time in July.
Section rotation
Like the traditional digital market, the development of NFT has a rotation of categories.
Last year, the hype sector in the encryption market rotated as follows: storage—DeFi—NFT—GameFi—Layer2—public chain—stable currency.
We can also see that NFT has transitioned from a high-priced auction item promoted by the media to a consumer product, and then gradually became a community-based investment product and status symbol, and finally fell into a product that can be actually applied to games and passes.
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Liquidity of each sector (source: NFTGo.io)Among them, there are many linkage events with the digital market, such as the GameFi game in the second half of last year, the upsurge of the combination of Metaverse and NFT, resulting in the overall prosperity of the GameFI NFT market, such as: Axie Infinity, The Sandbox, etc.; the second linkage is After DeFi, GameFi, the marketThe repeated performances have caused hype on concepts such as SocialFi, StudyFi, and SportFi, which has boosted the market value of related projects and also caused an increase in the trading volume of these NFTs.
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It is also worth mentioning that in January this year, the PFP category once again set off a blue-chip craze. Initially, the rising prices of CryptoPunks and BAYC brought about topical hype, which heated up the market sentiment of NFT and caused people to generate high-quality projects. As expected, the FOMO sentiment towards early blue-chip projects reappeared, which drove the transaction volume of Azuki, Clone X, mfer and other projects to rise again, thus triggering the overall prosperity of the NFT market in January.
The total volume of NFT transactions in January 2022; data source: NFTGo.io
secondary title
Quantitatively compare the market performance of leading project cycles
During the heat cycle, many NFT prices reached record highs at the peak of the heat cycle. But as market sentiment cooled, prices for these projects also began to fall.
The following selects the small cycle from January 1, 2022 to February 15, 2022, further analyzes the reasons behind the surge in trading volume, and compares the current market sentiment from May 1, 2022 to May 15, 2022. The performance of NFT projects.With reference to the following formula, we take an absolute change of 8% or more in the average price of collectibles asmarket sentiment changessymbols of.
Price changes are divided into the following three categories:
• Price change -8% or less: down
• Price change +8% or more: up
• The price range is -8% ~ +8%: flat
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Data source: NFTGo.io
Data source: NFTGo.io
Data source: NFTGo.io
secondary title
project development cycle
Hype is an important factor for the NFT market to gain attention. In terms of price impact, there are three main ways for projects to acquire hotspots.One of the first to appear wasprice hype
, in April 2021, the early hashmask brought successful hype, that is, the release uses a bonding curve-the release price is getting higher and higher over time. In this way, the last three avatars released by hashmask were traded at a price of 100E, which successfully attracted people's attention. However, this hype technique of using prices to generate FOMO sentiment was later abandoned by projects represented by BAYC.The second isCelebrities & KOL join to create hype hotspots
, such as: BAYC has attracted some stars, they put on BAYC's avatar, now this way is one of the best exposure modes that can quickly attract attention in the early stage of the project. As a PFP-like NFT, the avatar is an important manifestation of its "practicability".The third is in the middle of project developmentEmpowering NFT
Combining the events in the figure below, we can see the price impact of BAYC’s application of the above hype.
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Combination chart of event and BAYC price; data source: NFTGo.io
2021
Timeline of events:
In August, Bored Ape Yacht Club announced that it will airdrop MAYC to its holders.
On August 30, NBA star Stephen Curry purchased BAYC
On November 12, multiple Grammy Award winner Timbaland announced that the newly established studio will use BAYC NFT to create music and animation.
2022
On December 22, rapper Snoop Dogg announced the purchase of BAYC.
On January 1st, rapper Eminem bought an avatar to join the BAYC community
On January 12, billionaire Mark Cuban mutated his own ape.
On February 2, the famous host Jimmy Fallon told the world that he is a member of BAYC on the Jimmy Fallon show.
Black Rifle Coffee Company co-founder wears a BAYC dress at the New York Stock Exchange opening on Feb. 12
Released the metaverse concept land Otherside in April
life cycle
life cycle
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Life cycle; data source: NFTGo.io
The life cycle of a new technology from "birth to use" can be roughly divided into several key stages in the early stage:
1. Technology embryonic period:
Early proof-of-concept reports and media attention generate widespread publicity, but often no usable product exists and commercial viability has not been proven.
2. Expectation expansion period:
Early publicity produced some successes, often followed by multiple failures. A few companies will take action, but most will not.
3. Bubble burst period:
Interest waned as experimental projects gradually failed. Most of the failed projects are abandoned, and only when the surviving projects improve their products will people in the market continue to invest.
4. Value manifestation period
Comparing according to the characteristics, the NFT market is in the "expectation inflation period" and "bubble burst period", that is, the early publicity has produced successful projects, such as Yuga Labs series, Axie Infinity and other projects have become top-level projects in different tracks, while Most of the other projects will be eliminated because they do not seize the opportunity and have enough strength, which is doomed that the NFT market will go through "survival of the fittest". Just like after the ICO wave in the encryption market in 2016-2017, the market entered a period of "bubble bursting", and a large number of low-quality projects were eliminated.
The market temporarily went down after the wave in 2018; data source: CMC
secondary title
Comparison with the crypto marketRoughly speaking, the current NFT market volume is about the same as that of the encryption market in 2017. After the total market value of the encryption market reached 20 trillion for the first time in January 2017, it began a short period of decline, falling to 100% in two weeks. A quarter of the total market value, and then spent two months to continuously repair the market, starting a rising market, and the NFT market may also experience the same adjustment。
whole cycleNFT market and traditional encryption market. At present, the NFT market is also closely related to the traditional encryption market, and it will inevitably be affected by the general market. However, at the same time, the NFT market is more "slow" than the traditional cryptocurrency market. When the market fluctuates greatly, the NFT market often does not respond quickly. As can be seen from the figure below, as the market value of Ethereum continues to fall, the market value of the NFT market does not directly follow the decline.
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Comparison of ETH market value and NFT market value; data source: NFTGo.io
There are mainly the following reasons:
One is that because of poor liquidity, it takes a long time to wait for transactions without lowering the price.
first level title
epilogue
epilogue
Market conditions always come in like waves and leave like ebb tides. Although we can see that the NFT market is in a certain cycle of waves, it is more important to see the future development of NFT and the ceiling of market value.
