For investors and creators alike, non-fungible tokens (NFTs) are not a sure thing.
Blockchain analytics firm Nansen published a report on Friday, March 25 which shows nearly one-third of all NFTs minted since January 2021 are becoming a “dead collection with little or no trade activity post-minting.”
Nansen, which surveyed 8,400 collections made up of over 19 million NFTs on the Ethereum (ETH) blockchain, found that an additional third of NFTs are trading under the initial cost of minting the tokens.
The final third of NFTs have a trading-floor price that is higher than the mint costs.
However, Nansen says that when looking at the trend over time, the proportion of profitable minted NFTs are increasing in value over time. The proportion of dead-collections are gradually decreasing in value.
“NFT minting is increasingly competitive with more projects being introduced to the market,” says Nansen
As the community and its plethora of projects expands, it becomes more difficult to turn a profit.
Between January 2021 and February 2022, Nansen saw the number of minted collections skyrocket from 39,802 to 1,970,886. That's an increase of over 4,800%.
In January 2021 there were only 500 NFT minters in the market, compared to 1.2 million at the end of February 2022 -- representing 2,000% growth.
Nansen finds that most minters come and go, spending less than 0.5 ETH ($1,700) total, while the amount of big spenders –– those who invest over 100 ETH –– have decreased.
This sudden popularity in the NFT space has pushed down the average cost of minting, from a peak in May 2021(0.56 ETH) to between 0.07 ETH and 0.1 ETH.
According to a graph included in Nansen’s report, the payoff for minters has followed a “volatile trajectory,” trending downward over time.
In January 2021, profits hit a record high at 115 ETH per collection per month, then just over 90 ETH in May 2021. That number dropped to around 15 ETH last month.
This past weekend, Decentraland hosted the first-ever Metaverse Fashion Week within its 3D virtual world. Both GenZ fashion brand, Cider, and Tommy Hilfiger debuted NFT strategies. And last week, Meta CEO Mark Zuckerberg announced the possibility of NFTs coming to Instagram.
But is minting an NFT right now worth it?
Nansen says that if one does choose to participate, they should “consider their risk appetite…It is essential to conduct thorough due diligence on prospective projects such as researching the community, their roadmaps and the founding team's history.”>