For the skeptics, it is hard to wrap one’s head around why people are paying hundreds of thousands of dollars for a cartoon jpeg, nor understand why people are spending so much time on Discord grinding for whitelist spots.
In response, we would encourage the skeptics to look at the bigger picture and try to understand the value and promise of NFTs.
NFTs have enabled the possibility of digital ownership and supported the evolution of Web 2.0 (a read-write economy) to Web 3.0 (a read-write-own economy).
In a world where people are spending a significant amount of time infront of their screens, the ability to verify scarcity of digital assets for the very first time has the potential to spearhead a generational shift from physical to digital ownership.
In this section, we will review the NFT market activity in the first half of 2022, fundraising activity, as well as trends and outlook for the sector.
NFT Market

Despite a sharp decline in trading volume in June, the NFT market has had an overall resilient first-half. 2022 started strong for NFTs as trading activity surged, contributed by the launch of the LooksRare and X2Y2 marketplaces and the corresponding trading rewards offered by them both.
NFT sales recorded approximately $17.7B in first-half 2022, which is similar to sales recorded in second-half 2021. This is also a nearly 10x growth on a year-on-year basis when compared to first-half 2021.
The bulk of the trading volume was front-loaded, with most sales being logged between January and May. Trading volume in June was approximately US$678M, a sharp drop of over 80% compared to the average monthly trading volume of US$3.4B from January to May.
1H 2022 NFT trading volume (US$M) was flat compared to 2H 2021 but represents a significant increase compared to 1H 2021

Monthly NFT trading volume (US$M) was front-loaded with most sales in Jan – May but experienced a sharp drop in June

A deeper look at underlying drivers reveals that the relatively resilient first-half was contributed by healthy growth in terms of unique buyers and number of transactions, but offset by a fall in average sale price. This is intuitive as cryptocurrency prices have been on a downtrend over the past few months which translates into lower NFT sale prices in USD terms.
Unique buyers and total transactions grew but average sale price (USD) fell in 1H 2022

NFTs Price Performance
NFTs had a negative performance year-to-date when measured in USD terms primarily due to a fall in ETH prices. The Nansen NFT-500 index which consists of the top 500 Ethereum NFT collections, weighted by market capitalization, is used in our analysis to track broad NFT market activity. Admittedly, it is not a perfect representation of the NFT market given that not all NFT collections are based on Ethereum.
Ethereum NFTs command a dominant market share (>80% of secondary trading volume) and can be used as a barometer of the NFT market.
For the first half of 2022, the NFT-500 index returned -69.0% in USD terms. This is primarily contributed by the fall in ETH prices by -71.0% in the same period. Isolating the effects of the fall in ETH price, the asset class returned +8.3% when denominated in ETH. This is noteworthy considering the overall bearish market environment. If you had put your ETH to work by investing in NFTs instead of holding ETH, NFTs would have offset some of the losses of your portfolio.
1H 2022 NFT performance was negative in USD terms and but positive in ETH terms

The positive returns in ETH terms could have been contributed by positive investor sentiments due to NFT-specific events in the second half of June such as the NFT.NYC conference, as well as several notable acquisitions and fundraises. Prior to these events, the performance of the NFT index was in negative territory but started picking up momentum in the latter part of the month.
Nansen NFT-500 Index (ETH) showed a strong recovery in the latter part of June

Notable Acquisitions and Fundraises
Institutional interest remains strong as witnessed by the fundraising activity in the space. The funding will be key in helping teams ride out the crypto winter.
The following are several noteworthy raises and acquisitions in the first half of 2022:
- Jan 2022: OpenSea acquired DeFi Wallet Firm Dharma Labs for an undisclosed sum.
- Mar 2022: NFT-scaling platform Immutable raised US$200M in a Series C round led by Singapore state investment fund Temasek at a US$2.5B valuation.
- Mar 2022: Yuga Labs acquired CryptoPunks and Meebits from Larva Labs for an undisclosed sum.
- Mar 2022: Yuga Labs raised a US$450M round from Andreessen Horowitz at a US$4B valuation.
- Apr 2022: Rario, a NFT platform for cricket, raised a US$120M Series A round led by Dream Capital.
- Apr 2022: OpenSea acquired NFT marketplace aggregator Gem for an undisclosed sum.
- Jun 2022: Immutable launches US$500M fund to finance projects building web3 games and NFT-focused companies.
- Jun 2022: Magic Eden raised US$130M at a valuation of US$1.6B
- Jun 2022: Uniswap acquired NFT marketplace aggregator Genie for an undisclosed sum.
- Jun 2022: eBay acquired KnownOrigin, a NFT marketplace for an undisclosed sum.
- Jun 2022: 1confirmation launched a US$100M NFT fund.
NFT Marketplace

NFT marketplaces play an important role in facilitating trading activity by connecting buyers and sellers. OpenSea remains the leading NFT marketplace by trading volume and has approximately 50% market share. While OpenSea has largely maintained its market share over the past year, competition is fierce. New entrants such as LooksRare, X2Y2, and Magic Eden have demonstrated strong performance over the first half of 2022.

The Rise of NFT Aggregators
2022 witnessed the rise of NFT aggregators which allow traders to buy and sell NFTs across different marketplaces from a single platform (think of it as Skyscanner for NFTs). Such a functionality is coherent with and well-suited to fit general trading behaviors. At the end of the day, most NFT traders are inherently marketplace-agnostic. They typically do not mind which platform they are using as long as they are able to secure their ideal NFT at the lowest possible price. In this sense, NFT aggregators are able to capitalize on such user behaviors by consolidating listings across different marketplaces and presenting the listings in one unified interface.
NFT aggregators also bring additional value in terms of allowing traders to sweep the floors of collections by buying a bunch of lowest-priced NFTs without having to visit every single marketplace individually.
The top aggregators Gem and Genie have seen significant growth with over 511,000 ETH in trading volume so far this year. That represents an approximately 21x increase compared to 2021. 44 Market share of NFT aggregators has also grown from slightly over 1% at the end of 2021 to around 5% today. Note that the chart represents end-of-month snapshots which could result in some fluctuations depending on trades on that particular day.

While market share of NFT aggregators is still small, the recent acquisitions of Gem by OpenSea, and Genie by Uniswap are evidence of the strong interest that incumbents have in NFT aggregators and are also an affirmation of the value proposition of NFT aggregators. NFT aggregators look poised to play a pivotal role in shaping the NFT trading landscape in the long run.
The incentive to use NFT aggregators will likely rise if and when competition between NFT marketplaces heats up further and as liquidity becomes increasingly fragmented.
Overall, given the better user experience and ease of finding the cheapest NFTs all through one platform, the shift to using NFT aggregators is likely to continue gaining momentum. However, this shift might take some time to play out. Most NFT listings today originate from a small number of marketplaces (e.g. OpenSea, X2Y2, LooksRare) and it does not take much for a trader to check one or two exchanges before executing the trade.
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