Chainalysis Annual NFT Market Report: Which project has long-term market favor? Want to profit? Get on the whitelist first.

One of the hottest blockchain applications in 2021 is undoubtedly NFT. Blockchain analytics company Chainalysis recently released an annual market report on NFT, analyzing the development of the NFT market throughout the year and the investment strategies that can yield the highest profits in the process of investing in NFT. This report focuses on the transaction data of Ethereum and OpenSea.

Chainalysis 2021 NFT Market Report

On-chain Data Analysis

In the booming year of 2021 for NFTs, approximately $26.9 billion worth of cryptocurrency was sent to ERC-721 and ERC-1155 smart contracts over the course of the year.

By observing the cryptocurrency value generated by NFT transactions each week and the average transaction value, it can be noted that both of these data points have been consistently increasing throughout the year. More new users are entering the market, and the willingness to pay for NFTs is gradually rising. The peak in transaction volume at the end of August, as shown in the graph below, was mainly driven by the Serum airdrop of the Bored Ape Yacht Club (BAYC), with the introduction of the new Mutant Ape Yacht Club NFT series sparking a frenzy of transactions.

The following image showcases some of the most popular NFT projects in the market this year. It can be observed that only CryptoPunks have been able to maintain a consistent level of trading volume in the market. Many projects experienced high trading volumes for only a few weeks, such as Mutant Ape Yacht Club, Hashmasks, and others, with their weekly trading volumes during peaks often exceeding ten times the average weekly volume.

When segmented by region, it is evident that nearly 50% of the NFT market website traffic in the early part of the year came from North America. However, there is a gradual increase in traffic from Central Asia, South Asia, and Latin America, with no region currently accounting for more than 30% of the total traffic, indicating a more evenly distributed regional development.

In addition to the increasing transaction volume and influx of new users, the number of active weekly NFT projects on OpenSea that have conducted at least one transaction has also seen rapid growth, rising from 193 in early March to over 2,000 per week.

NFT Investment Performance Analysis

For most investors looking to profit from NFTs, gaining access to a project's whitelist is a common strategy. Being on the whitelist allows investors to mint NFTs at a lower cost, potentially leading to higher profits.

Chainalysis categorizes users based on whether they are on the whitelist and classifies them according to the ROI multiplier they received from their investments. It was found that about 78% of investors who were not on the whitelist failed to profit upon exiting, while over half of those on the whitelist were able to achieve profits of more than double their initial investment.

In addition to the advantages of being on the whitelist, Chainalysis divided over 23,000 user addresses on OpenSea into five groups, all of whom had experience with over 10 NFT transactions on OpenSea. Group 1, which is the most profitable group, while Group 5 is the least.

Looking at the number of transactions, Group 1, the most profitable group, had the highest number of transactions, with an average of 105 per person. The report attributes this to Group 1 typically having more capital and thus being able to increase their trading success rates through accumulated investment experiences.

Furthermore, in addition to having more transactions, the more profitable groups also tend to invest in a greater variety of NFT projects. While this is related to the total capital amount, overly concentrated investments do not seem to be as effective as observing various projects in the market.

Lastly, focusing solely on ROI, Group 1 is able to achieve an average profit of about 2.9 times their initial investment with each transaction.

From the data presented, a successful NFT investor often diversifies their investment portfolio as much as possible and accumulates profits through multiple transactions. When it comes to reducing costs, aside from obtaining lower minting costs by being on the whitelist, it is important to note that any single NFT transaction on Ethereum carries a significant value, with transactions worth thousands of dollars being common. It is recommended to do thorough research before making a purchase, understanding the project's future roadmap, in order to identify blue-chip NFTs with long-term investment value in the ever-evolving landscape of NFT projects.