Source images courtesy Bored Ape Yacht Club

The NTF market continues to develop and has great potential for growth. Research-driven venture capital firm, Loup, published an article on the outlook for the NTF market, which they believe touches a core addressable market worth over $1 trillion with an expanded market beyond $2 trillion.

Loup has posted an opinion piece by Doug Clinton in which he talks about the $1 trillion NFT market. He says that it is more certain than ever that 95%+ of NFT projects are zeroes, but that the NFT space is still going to be bigger than almost everyone realizes. Clinton said NFTs touch a core addressable market worth over $1 trillion, with an expanded market beyond $2 trillion.

NFTs address several basic human desires, including the desire to collect things we find beautiful or relevant. The obvious main target categories for NFT today are art, collectibles, luxury goods, games, and gambling. The global annual spend for those categories combined to a $1.05 trillion market in 2020. In 2019, those categories totaled $1.25 trillion, which Clinton believes is reasonable to expect in the 2021 post-pandemic recovery. Given recent history, the total addressable market should grow 4-7% in a normal year.

The author estimates that the total NFT volume will be $20.8 billion this year. Opensea is the biggest contributor with an expected volume of $14.5 billion, 70% of the total. The company has already done $4.4 billion in volume through August this year. But besides Opensea, there are other members of the platform. Rounding out the assumptions for the $20.8 billion 2021 estimate, Clinton expects 10% m/m declines in volume across the NFT market the rest of the year given the slowing in September. He also assumes Opensea, Axie, and Top Shot make up 90% of total NFT market volumes. However, the market becomes more attractive to the investor the deeper you delve into the numbers in order to separate the real from speculation.

Art
The primary function of art NFTs is the aesthetics of the piece. Art is collectible for its beauty first, not secondary characteristics like history or community membership. Any NFT with a focus on something beyond aesthetic excellence may use art as part of the project but would not be defined as art in this market estimate. Clinton estimates core art will make up 6% of total NFT volume in 2021, or about $1.2 billion.

Collectibles
Collectibles depend on historical or tangential cultural relevance for their value. There aren’t many NFT collectibles other than sports cards and comic adaptations to speak of yet, so the category is the smallest of the current group. Clinton expects core collectible volume will be 2% of total NFT volume in 2021, or just over $400 million.

Luxury
Luxury is by far the biggest category in NFTs. The purpose of a luxury good is to let the owner say something about him or herself to the world. Intentionality around identity is always a luxury. NFTs are the perfect tool for owners to describe something intentional to the digital world. For example, Cryptopunks have done $1.3 billion in volume this year alone. BAYC has done nearly $1 billion including Mutants and Kennel Club. Clinton expects the group to generate nearly $3.5 billion in volume for 2021.

Gaming
The primary purpose of Game NFTs is to serve some function in a game environment. It may consist of playable characters, weapons, items, or land.

Play-to-earn games are one of the most promising developments from the NFT game space, and Axie Infinity leads the way. Axie's already done $2 billion in volume, most of it coming in just the last few months. Even more impressive, Axie has more owners than any other NFT at over 1.8 million. Core NFT gaming spend will total $2.7 billion in volume in 2021, about 13% of total NFT volume.

Gambling
The speculative volume from the four core NFT categories totals $15 billion for 2021. That's 72% of all NFT volume, but it's only 3% of the nearly $500 billion global gambling and lottery industry.

Source: Uncomfortable Profit

Clinton believes the NFT industry could grow to $20 billion this year, but we are just beginning the first phase of the physical to digital transition. "There’s far more volume to come," says the author.

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Article edited by @SmokeyShorts, you can follow him on Twitter

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