Chainalysis: Retail Buyers Account for Over 80% of NFT Transactions in 2021

More than 80% of non-fungible token (NFT) transactions in 2021 will be worth less than $10,000, according to Chainalysis, which Chainalysis categorized as “retail” in a recent study.

Blockchain analysis company Chainalysis released a report titled "2021 NFT Market Interpretation" on December 6, detailing the entire 2021 NFT transaction trend. Researchers at Chainalysis looked at on-chain data from January to 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% on October 31, showing that as the year progressed, large collectors is increasing.

It added that institutional-sized deals accounted for less than 1% of all transfers but accounted for 26% of the actual volume in the period.

Retail-sized deals are those worth less than $10,000, while collector-sized deals are those worth $10,000 to $100,000. According to the study, institutional-sized deals are those worth more than $100,000.

The chart below shows the dominance of retail transactions for the year from January to October, with collector-sized transactions starting to pick up definitively by September.

The share of total transfer volume is largely made up of retail, but collectors and institutions have accounted for the vast majority of NFT USD-denominated transfer volume since March. Collector-sized transactions accounted for 63% and institutional-sized transactions accounted for 26%, which means that retail transfer volume accounted for 11% of the volume in the time period studied.

The researchers contrasted the NFT market with the broader cryptocurrency market, where retail transactions account for a much smaller proportion of total transaction volume.

“The data shows that the NFT market is far more retail-driven than the traditional cryptocurrency market, where retail transactions account for a negligible share of all transaction volume.”

The earning potential associated with NFTs is one of several factors driving cryptocurrency adoption into 2021. Proof of this is the fact that NFT sales are expected to hit a record $17.7 billion by 2021, according to a report by Cointelegraph Research.

In the past week alone, NFT sales reached $300 million, nearly a quarter of which came from sandbox's elder land purchases.

Additionally, according to Chainalysis, at least $26.9 billion in cryptocurrency has been sent to ERC-721 and ERC-1155 (the industry-dominated Ethereum standard for NFT) contracts in 2021.

Whitelisting is most profitable

Despite huge sums of money being spent on NFTs, the report states that “only 28.5% of NFTs bought during the minting process and then sold on the platform turned a profit”.

Chainalysis recommends whitelisting to increase the chances of profiting from newly minted NFTs. In OpenSea’s minting activities, users who entered the whitelist achieved profitability 75.7% of the time, while users who did not enter the whitelist only 20.8%.

“The data shows that it is nearly impossible to earn excess returns on minting purchases without being whitelisted.”

However, NFTs purchased on the secondary market after minting "resulted in profiting 65.1% of the time," the report added, suggesting that if one cannot make it to the whitelist, it is better to wait for the NFT series to enter the secondary market than to participate in the minting Activity.