NFT market balloons to $27 billion, according to new data

Yahoo Finance's David Hollerith discusses the factors contributing to the exploding NFT segment of the crypto market.

Video Transcript

ZACK GUZMAN: NFTs, of course, exploding. There a case to be made NFTs are the hottest story of 2021, as so much money has poured into the space. How much money? Well, $27 billion if you go off one stat here. And for more on that, I want to bring on Yahoo Finance's David Hollerith. And David, I mean, you and I have been kind of chatting about NFTs all year here, as we've seen the use case explode from the beginning around digital artwork, to now, a lot of different things. But what has you most, kind of, I guess, curious about whether or not NFTs can keep up the growth?

DAVID HOLLERITH: Yeah, Zack. I mean, I think your point at the beginning is really strong. It's not the same market it was. And NFTs are a perfect example about that. You know, it's a $27 billion market, according to this Chainalysis report that came out yesterday. Now, of that market, $16 billion of it is sort of going towards OpenSea, which is the largest NFT trading platform. Now, we're starting to see some trends, too. I mean, obviously, there is a lot of hype around this area. And, you know, we've sort of talked about that and been somewhat skeptical about, you know, everyone who's sort of talking about launching an NFT project.

But there are some patterns that are emerging. I mean, there's over thousands of new projects being issued. And some NFT collectors or traders are actually going onto these marketplaces, and they're making a pretty significant return on investment. So the report sort of dug into that more. And I can just sort of go through some of those statistics. But I guess, an interesting thing to pick up on is sort of the demographic of the most successful NFT traders. Now, these traders tend to be very plugged into the community aspect. So they're really involved in these social media channels, where the collections are sort of, like, broad, even sometimes weeks or months before a project is launched.

And then once they start trading, you kind of need to be in early, or you need to pick up an NFT sort of on the secondary market after it's been issued. There's a really high volume around the launch date. So it's a little bit like IPOs. Right at the beginning, a stock might launch or be issued, and it sort of becomes more of a-- the volume sort of pops, so to speak. So, a lot a lot of interesting things. I can sort of dig into it however-- whatever interests you.

ZACK GUZMAN: No, I mean, the thing that stood out to me, too, around kind of what to buy, right? That's a question our viewers might have around NFTs, as they kind of get more familiar with all these things. And that was one piece that stood out. Only about 28.5% of NFTs purchased during their minting, then later sold, wound up being a profitable trade. On the other hand, flipping some of these more established projects was 65% chance for a collector to profit, according to that report. So I mean, that, to me, is pretty important if you're thinking about double the likelihood that you're going to be able to sell something for a profit in something that's already established.

And we talked so much about the communities built around these, right? And you're seeing some of those listed on your screen. If they already have that and an active community that's chatting about it or on Twitter or whatever, you know, that's really, I guess, what's driving some of the adoption here.

DAVID HOLLERITH: Yeah, yeah, and just sort of to speak more about, you know, some of the people who are doing the best, they are sophisticated crypto traders. We can tell by a lot of their funds are coming from decentralized platforms and protocols. So these are people who have been involved in cryptocurrency for a while, so there is that edge.

So what I would say, what I learned from the report, you know, for newer investors who are getting involved, they should definitely do their research, follow communities, sort of pay more attention, and explore sort of before taking a leap into a project. And if someone isn't initially involved in a project before it launches, they're oftentimes a lot better than just sort of picking it up second hand on the market.

ZACK GUZMAN: David Hollerith bringing us the latest there on the NFT research being done. It's been fascinating to watch. We'll see what comes next. Appreciate that.

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