NFT, or nonfungible token, trading volume surged in the third quarter of 2021 to $10.67 billion, a report by analytics platform DappRadar found. That’s a 704% increase from the previous quarter.
August, in particular, fueled this growth. It was a record-breaking month, according to DappRadar, with over $5.2 billion in trading volume. Though things cooled off slightly in September, it still accounted for over $4 billion in trading volume.
This massive spike is the result of a number of factors, DappRadar found, which tie into two key reasons people are spending hundreds – and sometimes millions – on NFTs.
First and foremost, NFT investors see long-term value in them and believe they will appreciate over time.
NFTs are digital assets and can be anything online, such as art, collectibles and even memes. Certain projects are considered rare, like CryptoPunks, which was one of the first NFT projects. CryptoPunks are highly respected within the community and commonly sell for six or seven figures each.
Many investors are also bullish on the tech that surrounds NFTs and see a number of use cases for it.
NFTs are represented by code on a decentralized digital ledger called a blockchain. Each NFT can be bought and sold, just like a physical asset, but the blockchain allows for the ownership and validity of each to be tracked. The technology is extremely versatile and innovations are happening rapidly, which is exciting for investors in the space.
One example: NFTs have the potential to store, certify and document a number of different assets and data, beyond art.
“NFTs started with artwork that people use as their profile picture, but it could expand to a whole host of other items like passports, music, airline tickets and even houses and cars,” Benyamin Ahmed, an NFT coder and developer, previously said.
A current lucrative use for NFTs is in-game items, in which users can buy things like skins or accessories to be used in blockchain-based video games. In the third quarter of 2021 alone, in-game items generated $2.3 billion in trading volume, DappRadar found. This represents 22% of the total NFT trading volume.