Chainalysis has determined that most NFT transactions so far this year were from retail buyers, but the big volumes were driven by collectors and institutions.
More than 80% of all nonfungible token (NFT) transactions were worth less than $10,000 in 2021 according to Chainalysis which categorized them as “retail” in recent research.
A Dec. 6 report from blockchain analytics firm Chainalysis titled â€œThe 2021 NFT Market Explainedâ€ detailed NFT transaction trends throughout 2021. Researchers at Chainalysis studied on-chain data between January and October 2021.
While retail transactions accounted for more than 80% of all NFT transactions on any given day in 2021, collector-sized transactions rose from 6% in March to 19% by Oct. 31 indicating an increase in larger collectors as the year progressed.
Institutional-sized transactions accounted for less than 1% of all transfers but made up 26% of the actual trading volume during the period, it added.
A retail-sized transaction is one worth less than $10,000 while a collector-sized transaction is worth between $10,000 and $100,000. An institutional-sized transaction is one worth more than $100,000 according to the research.
The chart below shows the dominance of retail transactions throughout the year from January to October, with a definitive uptick in collector-sized transactions beginning by September.
The share of total transfers was mostly made up by retail, but collectors and institutions have made up the lionâ€™s share of NFT dollar-denominated transfer volume since March. Collector-sized transactions made up 63% of the volume and institution-sized transactions made up 26%, meaning retail transfers came to 11% of the volume for the time period studied.
The researchers contrasted the NFT market with the wider cryptocurrency market, where retail transactions make up a far smaller proportion of the total transactions.
â€œThe data shows that the NFT market is far more retail-driven than the traditional cryptocurrency market, where retail transactions make up a negligible share of all transaction volume.â€
The earning potential associated with NFTs was among several factors that drove cryptocurrency adoption through 2021. That is evidenced by the record $17.7 billion in NFT sales expected through 2021, according to a report from Cointelegraph Research.
In the past week alone, NFT sales amounted to $300 million, nearly a quarter of which came from metaverse land purchases at The Sandbox.
Additionally, there has been at least $26.9 billion in cryptocurrency sent to ERC-721 and ERC-1155 (the industry dominant Ethereum standards for NFTs) contracts through 2021 according to Chainalysis.Â
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Whitelisting best for profits
Despite the tremendous amount of money being spent on NFTs, the report stated that â€œjust 28.5% of NFTs purchased during minting and then sold on the platform result in a profit.â€
Chainalysis suggested getting whitelisted to increase the chances of turning a profit from a newly-minted NFT. Users who made the whitelist on a minting event on OpenSea turned a profit 75.7% of the time versus the 20.8% who did so without being whitelisted.
â€œThe data suggests itâ€™s nearly impossible to achieve outsized returns on minting purchases without being whitelisted.â€
However, NFTs bought on the secondary market after minting â€œleads to profit 65.1% of the time,â€ the report added, suggesting that if one cannot make the whitelist, it is better to wait for an NFT collection to hit a secondary marketplace rather than participating in a minting event.