Andrew Kang: How big is the NFT market?

What is the size of the NFT market? This question is difficult to answer because NFTs can represent many distinct asset types. Ownership of bonds and real estate can be expressed in NFT, as can art, in-game items, and music.

You can see the broad classification of different types of NFTs from the figure below.

Andrew Kang: How big is the NFT market?

Securities NFTs may constitute a huge market, but the required infrastructure and regulations are still in the early stages of development. In contrast, collectible NFTs have grown rapidly this year into a market measured in units of 1 billion U.S. dollars. Recently, the daily transaction volume has exceeded 100 million U.S. dollars. Let’s start by focusing on the latter.

Andrew Kang: How big is the NFT market?

Collectible NFTs can be divided into multiple categories. For example, CryptoPunks can be seen as art and historical artifacts, because they are Ethernet Square, one of the earliest NFT collection – Please note, Visa recently bought a CryptoPunk, called the historic commercial heritage.

NFT may be just a kind of art or meme at first, and later it may be integrated into the game as an object or avatar: imagine using the Bored Ape you bought. NFT as a new character, go to play a new version of the street Overlord (Street Fighter) game.

One way to measure the size of the NFT market is a bottom-up approach-look at the current market value of Topshots, CryptoPunks, Artblocks, etc., and predict their growth. Nansen estimates that the market value of these top NFT series exceeds $4 billion.

Andrew Kang: How big is the NFT market?

However, considering that certain sub-sectors (meme, video game moments, etc.) have not yet made breakthrough progress, forecasts based solely on current market growth may greatly underestimate the market value of NFT. For example, market capitalization of $ 40 billion in dog money can be considered an early representative of fragmentation NFT, but the meme NFT primary market sales barely reached number eight; we expect fragmentation (fractionalization) agreement recent Will accelerate this trend.

The main method of the top-down valuation method is to refer to the real-world item market with similar characteristics as the collectible NFT, both of which can meet similar human needs. These characteristics boil down to a combination of the following requirements:

  1. Not the daily needs of ordinary people
  2. It can be used to satisfy the show-off of “wealth is self-willed” (please refer to the latest article by Arthur Hayes)
  3. Have cultural or historical significance

Some real-world markets that can be used as reference and have fully digital counterparts include:

  • Luxury goods (fashion products, luxury cars, luxury watches, champagne)
  • Artwork
  • High-end real estate
  • Cultural relics
  • Other collectibles (stamps, sports collectibles, coins)

How big is the luxury market? Take a look at the market capitalization list of several companies (sorted by market capitalization):

  1. $365 billion-Goldman Sachs
  2. US$153 billion-Louis Vuitton Group
  3. $133 billion – Uber
  4. US$75 billion – Walgreens
  5. US$42 billion – Hermès

Haha, I made a joke. The market capitalization numbers listed above are correct, but the ordering is disrupted by me. The fact is: Louis Vuitton Group and Hermès ranked first and second respectively, while Goldman Sachs, Uber, and Walgreens ranked third, fourth, and fifth respectively. The correct order is like this:

  1. US$365 billion – Louis Vuitton Group
  2. US$153 billion – Hermès
  3. $133 billion-Goldman Sachs
  4. US$75 billion – Uber
  5. US$42 billion – Walgreens

What about the art market? According to reports, the sales of the global art market in 2020 will be 50 billion U.S. dollars. However, the turnover rate of non-digital artworks is not high. The artworks purchased by buyers are usually not resold in the same year, so the figure of US$50 billion is not equivalent to the sum of the value of all artworks.

If we look specifically at one artist: Picasso, the estimated “market value” of all his 50,000 works is in the tens of billions of dollars. What if Monet, Rembrandt, Pollock, and Basquiat are included?

Some people think that the NFT market is saturated. CryptoPunk, artblock, boring ape, etc. are too many. But this is not the case compared to the number of markets that NFTs can cover.

Patek Philippe is considered to be one of the top luxury watch brands and has existed since the 19th century. They produce more than 60,000 watches every year. Take a look at the annual output of other luxury brands: Richard Mille watches produce more than 4,000 watches per year, Lamborghini sports cars produce more than 8,000 cars per year, and Hermès produces more than 100,000 watches per year. Year after year, the scarcity of these items is declining. For popular NFTs with capped caps, the situation is just the opposite, because NFTs will naturally be lost over time.

Last but not least, consider the current game skin market, which is estimated at $40 billion per year. The market itself is already digital, and soon game developers may start to abandon the separate charging model and begin to achieve a more open market through NFT. Imagine how large-scale growth this market will be with the introduction of a meaningful way of earning cash flow from in-game assets.

So how big is the NFT market? It’s much bigger than most of us think.

Thanks to Benjamin Simon, Marc Weinstein, and Eva Wu for their feedback on this article.

Written by: Andrew Kang, founding partner of Mechanism Capital, a blockchain investment institution.
Compiler: Perry Wang


Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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