The Non-Fungible Token (NFT) market has tanked by nearly $1 billion since January. Yet this unprecedented downturn threatens to make even the most established collections long-term unaffordable. Pulling Token provides a brilliant critique of this new world order. Its scope includes utility, governance, and determining factors in the survival of major market players such as Bored Ape Yacht Club and Pudgy Penguins.

The Great NFT Collapse: A Deep Dive into the Numbers

The numbers paint a stark picture. It’s a massively different landscape compared to its peak in 2021, when the NFT trading volume has collapsed by a shocking 93%. In 2021, the market reached $2.9 billion in sales volume. By 2024, this number had plummeted to just $197 million. The decline didn’t end there. Only $23.8 million was traded in Q1 2025. That’s a 19% decline from 2023, and an 18% year-over-year decline in NFT sales.

Naturally, the average price of Art NFTs has dropped drastically. After peaking at $1,251 in 2022, it dropped to $475.37 in 2023. Though the return to $1,273.09 in 2024 was slight, Q1 2025 experienced another drop down to $645.34. The bottom line is that the pool of active traders is down a lot. It fell off a cliff from 282,683 in 2023 to 76,176 in 2024 and then plummeted down to only 19,575 in Q1 2025, numbers we haven’t seen since before the boom. These numbers highlight the struggles that the NFT market is experiencing.

The biggest force driving down NFT valuations, as many have noted, is their close relationship with the general cryptocurrency market. After 2021, crypto prices crashed and all the “value” of NFTs disappeared with it. This change has injected extreme volatility and uncertainty into the investment landscape. This positive correlation points to the requirement for NFTs to create intrinsic value outside of speculative trading.

How Established Collections are Holding Up

Established NFT collections such as Bored Ape Yacht Club and CryptoPunks dominated the NFT market in the NFT gold rush. They’re now experiencing the belated effects of the market correction. In December 2021, Bored Ape Yacht Club replaced CryptoPunks as the most expensive NFTs. This was a clear break in what the market wanted. Even these staple NFTs have lost a huge share of their prior value.

Bored Ape Yacht Club, for its part, has been trying to keep the illusion of community alive with exclusive events. Bored Ape Yacht Club has held immersive events in New York, California, Hong Kong and UK. The ultimate purpose of these meetings is to foster a dynamic, engaged community of their owners. These events have been the backdrop for yacht parties with A-list performers. They’ve done things like curated intimate dinners designed to help build relationships between fellow NFT holders.

For instance, in November 2021, the company organized an entertainment weekend in New York, featuring a yacht party and performances by Chris Rock, Aziz Ansari, and The Strokes. In June 2022, an "ApeFest" event at South Street Seaport included performances by LCD Soundsystem and Haim, alongside a Snoop Dogg impersonator. These events have raised engagement levels to an astonishing degree. Even with that, they have not completely made up for the greater market decline.

The Rise of New Contenders: Milady and Pudgy Penguins

Even with the continued downturn of the market, prompters such as Milady and Pudgy Penguins have made waves. In doing so, they have proven to be incredibly resilient in the most unpredictable of times. These projects have some combination of unique art style, deep community engagement, and innovative use case that helps them stand out.

Pudgy Penguins engages in thoughtful, purposeful brand development. They build a highly engaged base with thrilling programs. In particular, they have done a wonderful job harnessing social media and IRL community events to activate their existing holders and onboard new ones. One thing that makes Milady stand out is its unique aesthetic. This distinct aesthetic has endeared them to a passionate NFT community, signaling the importance of brand and community in the NFT ecosystem.

With these newer projects currently booming, it’s clear that there’s still much more room for innovation within the NFT space. There’s still a long way to go, though! Whether through dance or visual arts, these projects are creating vibrant communities and emerging cultural aesthetics. By establishing new and exciting use cases for them, they are finding new direction and purpose and leading the way for an NFT market resurgence.

The Future of NFTs: Innovation and Resurgence

Today’s market climate might seem dismal, but don’t lose heart just yet. Innovation and a long overdue, but welcome, resurgence in the NFT market are both coming soon! A few important areas of progress might open the door to a more sustainable and fruitful NFT ecosystem. These include:

  • Improved User Interfaces: Better user interfaces, no-code NFT creation tools, and more intuitive wallet designs can make it easier for new users to enter the market and for existing users to engage more actively with NFTs.

  • Layer 2 Solutions: Layer 2 scaling solutions like Immutable X and Optimism are addressing high gas fees and slow transaction times on the Ethereum network, making it more feasible for users to buy, sell, and trade NFTs.

    • Interoperability: The ability to move NFTs from one blockchain to another without losing core data or ownership history can increase liquidity and trading activity by allowing NFTs to be traded across multiple platforms.

  • Fractional Investments: Robust platforms facilitating fractional investments can unlock new capital flows globally, enabling more users to participate in the NFT market.

  • New Business Models: Innovations like "play-to-earn" games and NFT-based financial products can create new opportunities for users to earn value from NFTs, potentially leading to increased trading activity.

Projects that focus on the following strategies may be better positioned to weather the storm:

  • Interactivity and extensibility: Incorporate gaming elements or enable tokens to be used in other applications or platforms to increase utility and value.
  • Strong community connection: Foster a strong connection with holders, as seen in Azuki's case, to help weather FUD (fear, uncertainty, and doubt) and maintain a loyal following.
  • Diversification and expansion: Explore new markets, chains, or ecosystems, like Magic Eden's integration with Ethereum, to increase reach and opportunities.
  • Empowering holders: Implement mechanisms to empower holders, such as EPG (Elite Penguin Group) and EPS (Elite Penguin Status) in the Element ecosystem, to incentivize loyalty and growth.
  • Innovative narrative and IP development: Develop compelling narratives and intellectual properties (IPs) that resonate with audiences, like Azuki's Japanese style and cultural integration.

Things aren’t so rosy for the NFT market these days. How the NFT market can recover and find a path towards long-term growth. By solving issues such as high gas fees, complicated UX, and lack of interoperability along with developing vibrant communities and fostering new use cases, we can lead this next wave. Pulling Token continues to analyze the market, and it will be fascinating to see which projects and strategies ultimately succeed in navigating this evolving landscape.