Understanding the Hype behind Non-Fungible Tokens (NFTs) and the Rise of Pinterest

Understanding the Hype behind Non-Fungible Tokens (NFTs) and the Rise of Pinterest

Non-Fungible Tokens (NFTs) have taken the world by storm, with a total market capitalization of $338 million in 2020 and a staggering Compound Annual Growth Rate (CAGR) of 102% since 2018. But what is it about NFTs that has captivated people's attention and led to such rapid growth? To unravel the hype behind NFTs, we need to delve into human psychology, the rise of disposable income, and the increasing importance of the online world.

Humans are Natural Collectors

The psychology behind 'collecting' is a widespread phenomenon, even among adults. People have a natural inclination to collect things, whether it be physical objects or virtual assets. In fact, the toys/models industry alone accounted for $3.45 billion worth of US retail sales in 2012. This desire to collect is further fueled by emotional attachment, as shown by a survey that revealed 68.4% of NFT holders possess emotional attachment to their NFTs. This emotional and legal ownership is a key factor that sets NFTs apart from other forms of digital assets.

Higher Disposable Income

Disposable wealth has played a significant role in the emergence of the modern collector. With increased disposable income, people have more resources to allocate towards their hobbies and interests. This is evident in the NFT market, where most spending occurs when there is higher disposable income. The allure of owning unique digital assets that hold both emotional and investment value is irresistible to many individuals.

Profit-making Opportunities

The rise of NFT traders and the potential for profit-making has also contributed to the hype surrounding NFTs. Traders buy NFTs upon issuance and resell them at higher prices, taking advantage of the growing demand for these unique assets. The fact that the number of NFT buyers is outstripping sellers suggests that more users are entering the market for various reasons, such as reselling or keeping/using them. The potential for eye-watering profits serves as a powerful incentive for traders to invest in NFTs.

Increased Market Awareness

While NFTs have been around for some time, their recent explosive growth can be attributed to increased market awareness. Consumers are spending more time consuming content, with an average increase from 3 hours 17 minutes to 6 hours 59 minutes per day. This increased content consumption has helped spread awareness of NFTs and their potential value. As more people become aware of NFTs and their unique properties, the market continues to expand.