The NFT sector is gradually fading off, forcing numerous marketplaces to go into a non-functional state. This sudden downturn is a reality no one ever saw coming when digital assets including NFTs dominated the investment space in 2020.
The COVID-19-enforced lockdown paved the way for Non-Fungible Tokens to thrive, fueling a new niche in the blockchain sector. Enjoying explosive growth, in 2020, the NFTs space recorded a trading volume of $82 million, before soaring to $17 billion the following year.
Furthermore, the figure represents a 21,000% increase, underlining the increasing retail adoption of NFTs. During the year, some NFT sales raised eye-brow earning the innovation a nickname of being the new digital gold.
In December 2021, web3 artist, Pak set a record for the most expensive NFT sold after selling his NFT “Merge” for $91.8 million. Before then, digital artist, Mike Winkelmann, popularly known as Beeple held the record after selling his Everydays: The First 5000 Days NFT for $69 million through an auction earlier in 2021.
At the peak of this staggering growth, in 2022, NFT marketplaces witnessed about $57 billion in trading volume. As a result of the growing adoption of digital collectibles, experts predicted that the sector will witness more adoption and growth by 2023.
However, things didn’t go as expected as the NFTs market endured a significant decline. According to a report by Dapper, NFTs trading volume in 2023 went down by 18% to $16.8 billion.
In 2024, the sector witnessed its worst-performing year since 2020 as its trading volume further dipped by 19% to $13.7 billion. Amidst this high-profile decline, a host of NFTs marketplaces shut down, raising questions about factors that contributed to the dip.
Insight into the history of NFTs
The early stages of NFTs can be traced back to 2012 when Bitcoin-based colored coins first hit the market. Meanwhile, the invention didn’t gain much traction as blockchain concepts were entirely new back then.
Thereafter, in 2014, Kevin McCoy minted the first NFT “Quantum” on the Namecoin blockchain. NFTs didn’t gain much prominence until 2017 thanks to the introduction of the Ethereum network.
Ethereum made its debut in 2015 with the launching of its mainnet network, and its infrastructure led to the advancement of decentralized finance, decentralized tools, and Non-Fungible Tokens. With the launching of the layer 1 blockchain network, CryptoPunks NFTs made an intruding market entry as one of the foremost collections with widespread acceptance.
Similarly, CryptoKitties, a blockchain game based on the Ethereum network is another successful foundational collection. The game permitted players to buy, collect, breed and sell different kinds of digital cats.
Further supporting the embracement of NFTs is the emergence of OpenSea, a marketplace that curates digital collectibles from various collections.
Launched in December 2017, within the first few months of its opening, the marketplace already listed many NFTs from about 30 collections. It is worth mentioning that early NFTs on Ethereum were minted as ERC-20 tokens because the ERC-721 standard specially created for NFTs didn’t launch until 2018.
Why are NFT marketplaces closing up?
Between August 2023 to May 2025, more than 10 NFT marketplaces have shut down citing various reasons. Popular names like MakersPlace, Quidd, Immutable Marketplace, X2Y2, LG Art Lab, GameStop NFT Marketplace, Kraken Marketplace, Recur, Bybit Marketplace, Voice, Formfunction and many others have ceased operations.
One of the major factors that contributed to the exodus of firms from the NFTs space is market decline. In recent times, trading volume and value of NFTs have dropped drastically affecting the sustainability of the platforms.
With low trading volumes, NFTs marketplace are struggling to raise revenue to remain in business. Likewise, the growing relevance of new innovations in the blockchain space also shifted attention away from NFTs.
Currently, newer concepts like meme coins and artificial intelligence are dominating much to the decline of NFTs. X2Y2 for instance announced the closure of its NFT marketplace to focus on artificial intelligence.
Also, the NFT sector is overwhelmed with numerous projects that are struggling to create value. The NFTs boom in 2020 led to the creation of projects that are overpriced triggering a decline as the broader crypto market experienced a significant downturn in recent years.
Conclusion
NFTs marketplaces are shutting down for various reasons. The uncertainty of regulation on the industry further contributed to the chaos. Notably, the decline in NFTs sales and trading volume are major factors, while other issues like security concerns, project failure, shift in investors’ attention, lack of utility, economic downturn and many others caused the dip.
Nevertheless, it could have been a different situation entirely if metaverse hadn’t fallen out completely. Most NFT projects managed to generate a solid use case through metaverse, however, the advancement of AI has cooled interest in the concept.
Still, there is a possibility for the NFT space to revive, but the chances of hitting the levels it recorded between 2021 and 2022 look unattainable.
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