In 2023, the cryptocurrency market is gradually regaining lost ground despite the ongoing bear market. The crypto market cap briefly surpassed $1.7 trillion for the first time since early May 2022. Against this backdrop, analysts at DappRadar reported that the trading volume of the NFT market almost reached $1 billion in November, maintaining a steady upward momentum. Sounds promising, doesn’t it?

Moreover, 2024 will mark the long-awaited halving of the Bitcoin blockchain network. Goldman Sachs analysts predict that the U.S. Fed may cut interest rates twice in the next two years, starting in Q3 2024. It seems that barring a black swan event, the situation will be more than favorable for a bull rally by the end of 2024. And that, in turn, will certainly affect the NFT market as well. So why does our headline claim that it’ll never return to its highs?

When Will NFT Market Return to Its Peaks?

NFT Speculative Potential Dried Up

The primary reason is that the NFT market’s peak was achieved through speculation. The first noticeable spike in trading volume was due to the NBA Top Shot collectible sports cards. The activity around that project climaxed in January-February 2021. By the end of 2023, the total trading volume of the cards was over $1 billion, but that’s not the main achievement of the project. It managed to stir up the market by creating hype, which was eventually used by others.

The boom of the NFT market fell on the period from June 2021 to July 2022, which can be clearly seen in the CryptoSlam! data. The biggest “A-listers” of that time were Bored Ape Yacht Club and other projects of the Yuga Labs studio that bought out their main competitors on the rise — CryptoPunks by Larva Labs.

In fact, it was BAYC that became the information flagship of that period and of all the hype around NFTs. Here are several factors that contributed to this (in order of importance):

Effective marketing. The media was awash with reports that another “celebrity” had bought an NFT from the BAYC collection, and celebs themselves were bragging about it on social media, generating tremendous coverage for the brand. One day, someone will write a thesis analyzing every aspect of Yuga Labs’ marketing campaign.

FOMO. During that period, owning NFTs was not only trendy but also profitable. In the midst of the COVID-19 pandemic and the economic crisis, a chance to make easy money attracted more than a million wannabe investors and traders every month.

Novelty. In 2021, NFTs seemed like something new, offbeat, and eye-catching. Add to that the media coverage of that time surrounding the cryptocurrency industry, and you get absolute faith in a fairy tale, “fortune favors the bold” slogans, and things like that.

But what united Yuga Labs, Larva Labs, and their many followers from that period? Today, they all fall into the PFP NFT category — their NFTs may be used as profile pictures but offer no other functions. Any attempts to grant their owners any privileges were mostly labored and unnecessary.

According to NFTGo, the NFT PFP category still accounts for more than 60% of the capitalization of the entire NFT market. But their value is purely speculative in nature. At that, the effect of novelty is gone, and users have already seen prices of such tokens falling. For example, the price drops from $600,000 to $10 and never goes up again, so no marketing can convince the masses to invest in pictures.