Poof's Simple NFT Market Analytics
Poof's Simple NFT Market Analytics
I hate most NFT analytics -- here's something simpler to use
Note: This starts with a long intro, if you just want the data skip to the end
General Thoughts on Analytics in NFTs
NFT analytics platforms are mostly focused on trading. That means, they want to see a singular thing: did price go up or down. There is some merit to this, but for understanding the big picture — what’s happening with “consumers” of NFTs — it’s almost virtually useless.
The weird part about crypto is that you have all of the data in the world, but there are very minimal standards on how to measure base metrics. For my own sanity, I’ve generally tracked a very small subset of metrics that I feel are most important and then looked at them consistently over time. In this sense, I’m anti-dashboard. Dashboards are good for working on a particular situation or checking something real time. Dashboards are terrible for standardized reporting.
Methodology of poof’s NFT Analytics pack
I’ve created my own cheat sheet to look at overall market health for myself. This isn’t focused on projects, on individual floor prices, or anything else.
We can look at two ways to decompose overall NFT Volume into its causal drivers.
Volume = (Wallets Participating) x (Volume per Wallet)
Volume = (Transactions) x (Volume per Transaction)
We can get cute with these equations and break them down further. We can also debate which one is better to look at. For me, I prefer to just look at three separate metrics from the above:
Wallets Participating (buying or selling NFTs over a time period)
Transactions (total NFT buy or sells over a time period)
Volume per Transactions (average ETH volume of those individual transactions)
And of these metrics, I find Wallets Participating the most indicate of overall ecosystem health.
There are ebbs and flows of engagement, interest, big mints, hype moments, and more that will throw your transaction and volume numbers up or down. However, wallets are fundamentally representing the level of true unique people who engaged with NFTs over a particular time period. If that number is going down, there’s less people engaged; if it goes up, there are more. Over longer periods (e.g. a year), things like bots, multiple wallets, etc start to cloud the data, but on a short weekly or daily average — you get a good idea of what true engagement looks like.
So… the critical question: ARE WE BACK?
poof’s NFT Analytics pack as of 11/27/2023
Answer: No we are not back, but maybe there’s some slight improvement.
Here’s what’s important: Wallets are (62%) vs PY in the latest week. Additionally, the trend of wallet declines is fairly similar although improving. If you look to the right, we were (70%) vs prior year in the latest 13 weeks and now we are (62%). An 8% improvement is nothing to sneeze about, but we need to start seeing some more significant improvement to feel like we are “back.”
Why do I not look at the change versus prior period which looks to be up +3%!? Because of seasonality. All things have a seasonal curve of participation. The Internet, Crypto, and NFTs have a seasonal curve as well. No matter what the year is, there is generally an increase of participation going into the American Holidays towards the end of the year. Year over Year trends help capture that and give us a true sense of how things are progressing. If the year over year trend is similar over several time periods — it gives us a sense of whether or not there is true improvement or decline in what we are seeing.
Here’s a view of the weekly wallet trend this year, 2022, and 2021 that helps illustrate:
Wallet participation in 2022 is a little misleading as you had the start of the bear, but you get a general sense that the summer in normal circumstances are likely a time of lower participation than the ends of the year. There’s art and science here, but having YoY trends and looking at them over time helps us here.
Finally, returning to the original view, the bar charts at the bottom also give us a sense of the absolute scale of the weeks. 11/6 is an interesting peak week where we had much more on chain activity. It also coincides with when there was a lot of generalized crypto excitement as BTC, ETH, etc were growing in value. These are things to watch.
So those are the big things… What do we want to see to start feeling the engagement improving in NFTs again? We want the trend in Wallet participation to start improving — both YoY and period to period. We need to see more than ~40k-50k weeks of participation.
poof’s Homework
So… that’s great, we can see when NFT interest is increasing or decreasing. That doesn’t help me poof! I want to know WHEN NFT interest is going to increase!
Well… I look at something different for that… I’ll do a quick overview of how I look at overall inflows of capital into crypto and what market conditions lead to “mania” moments that may overflow into NFTs or other similar areas next week.
In the meantime, your homework is to check out this post on Glassnode about indicators of “alt mania” based on inflow of capital into BTC, ETH, and Stablecoins:
Glassnode: Capital Flows, Exchanges and Altseason
Going forward, I’ll do a very brief dashboard view update and some light commentary every Tuesday here going forward so make sure to subscribe if you haven’t already.