HOW THE NFT MARKET WORKS

Welcome to the third chapter of the NFT creation course! In this chapter, we’ll cover the NFT market, digging deeper into how it works, its mechanics, and all the details you should know to move through this complex sector the right way.

To keep things organized, we’ll split this chapter into “4 sections”: the types of NFT projects out there, the blockchains that support NFT, the types of audiences behind NFT, and finally, the most important part: how the NFT market works so an NFT collection can succeed.

WHAT TYPES OF NFT PROJECTS ARE OUT THERE

Even though we all know NFT collections like “Bored Ape Yacht Club” or “Crypto Punks”, there are thousands of projects that have seen, and still see, major success. Broadly speaking, we can group them into 4 types of collections: PFPs, Utility, Gaming, and Art.

PFP COLLECTIONS

PFP collections are built around the collection’s art as profile pictures, and their main utility is the community behind them. They create a sense of belonging and deliver value to that community in different ways.

NFT WITH UTILITY

Utility-driven NFT give holders, or the wider community, a clear practical use case. When that value goes to the community, it usually creates upside for holders too. Revenue sharing is a common model, meaning the project shares part of its earnings with holders.

GAMING NFT

Gaming NFT projects are usually known as p2e (play to earn). In simple terms, they are projects built around a game. The NFT are often characters from that game, or at least assets that form part of it. Once the collection is ready, the team contacts a professional custom game designer and sets a launch date.

ART NFT

Finally, there are art NFT. These usually attract a much more niche audience, with collections that see lower trading volume and focus on collecting.

WHICH BLOCKCHAINS SUPPORT NFT

Almost every major blockchain supports NFT, but that doesn’t mean they’re the best choice for launching your NFT collection. We’ll use statistics from the top 10 blockchains by NFT sales volume to narrow it down to the most attractive options.

TOP 10 NFT BLOCKCHAINS BY TRADING VOLUME

In first place, we have Ethereum, the name everyone knows. It was the blockchain that brought NFT to life (although it wasn’t the network where the first NFT was created). It has always been hard to beat, and still is, only overtaken on specific days by Bitcoin or Solana.

Right behind it are Bitcoin NFT, known as Ordinals. They’re very recent, but they’ve clearly carved out a serious place in the market. We’ll need to watch their evolution and see how far they go.

In third place, we have Solana. Its main activity hub is NFT, and the network’s success has been built around them since 2021. Since breaking into the market, it has consistently stayed in the top 3.

Next up is Mythos, another very new and successful network focused on NFT projects in gaming. It made it into the top rankings thanks to “Blankos Block Party” and its collaboration with the NFL.

Polygon is next. Sitting in fifth place, it has seen strong growth and keeps gaining traction. It has become the main entry point for ETH buyers who cannot or do not want to pay $50-150 transaction fees.

InmutableX is far less known among mainstream users. It is also focused on gaming, and has stayed near the top thanks to major games like “God’s Unchained”.

BNB is the Binance network. It is not as widely adopted as a marketplace, but it has gained solid traction with NFT games like Plants vs Undead and Cryptomines. Decent numbers, though still a bit behind the networks already mentioned.

The last 3, Cardano, Arbitrum, and Flow, sit much lower in volume, even though Cardano is a much better-known Blockchain than some of the others we have already covered. 

It is worth noting that Flow, surprisingly, ranks in the all-time top 4 for NFT sales volume (it has been the network chosen by Zuckerberg’s Meta, the NBA, NFL, UFC, and even La Liga).

A special mention also goes to Wax, which has been highly successful in NFT gaming. Hedera also stands out, especially among Hispanic NFT collections.

TYPES OF NFT INVESTORS

After what you’ve read, you probably have a clear idea of which options fit you best. But you also need to understand the different types of investors you may have in your NFT collection. Here, we’ll split the NFT audience into 4 groups: “gamers,” “art collectors,” “speculators,” and “real investors.”

Gamers are the type of audience that mainly invests, and in many cases only invests, in P2E. In other words, in game-based NFT.

Art collectors are investors who buy NFT simply because of the value they see in its art.

I call speculators those investors who only want to buy and sell once they believe they have made a solid profit. In other words, they do not invest because they believe in the project, but simply to speculate on its price.

Finally, we have what I like to call “real” investors. Even though they also speculate, they are more focused on the utility or value the project provides, and they invest in base because of that. You could say they are looking at the medium to long term. 

These last two also fall under “subtypes” of gamers and collectors. But they spend more time in these “pure” NFT projects focused on PFPs or utilities.

HOW THE NFT MARKET WORKS

Keep in mind that every blockchain and every type of NFT project works in almost the same way when it comes to the market.

The NFT market runs on speculation. People speculate on base because of hype and FOMO (Fear Of Missing Out). That hype is built by influencers and, above all, by DAOs (meaning NFT communities and already minted projects). Investors will buy your NFT if they believe the investment can be profitable.

DAOs run collabs, partnerships, and “Alpha Calls” for emerging collections, giving them a unique level of reach and credibility. As for influencers, they have a major impact on Twitter, though they also stand out on Youtube, especially when talking about p2e.

In short, the market depends on people talking about us, but talking about us as a major investment opportunity.

CONCLUSION

To wrap up, I want to stress the most important message I want you to take from this chapter: Investors will buy your NFT if they believe the investment can be profitable. That is how the market works. You need to adapt to it and build a collection with the right strategies in place to give it a real shot at success.

Thanks for reading. See you in the next chapter!