“Collapsing,” “flatlining,” “falling fast”—these are the words being used to describe the NFT market in the last couple of months, during which sales have dwindled from previous highs.

Total trading volume in May is projected to be $5 billion, compared to $17 billion in January and $12.4 billion in February, according to data from Dune Analytics. These shrinking sales come amid a greater crash in crypto that has shed nearly $1 trillion in market value over the past month.

Brands with NFT strategies are already feeling the squeeze of the downturn. The floor price for Bud Light Next’s NFTs is $38, down from the original price of $399. The floor price for Under Armour’s Genesis Curry Flow NFTs is $90, down from an original price of $333.

The decline is also impacting NFTs that represent virtual land, which have previously been a hot acquisition for brands looking to build experiences in the developing metaverse. The current floor price for a plot of land on The Sandbox, for example, is roughly $3,300, per CoinGecko. Only a few months ago, this price was between $9,500 and $11,000. 

Read more: Why brands are buying land in the metaverse

While experts told Ad Age that reports proclaiming the death of NFTs are overblown—indeed, these have received substantial criticism online—they concur that brands must be prepared for what is emerging as a major inflection point in the NFT space.

“The market right now is incredibly choppy and volatile, but I actually think this is the biggest opportunity for brands and progressive agencies to be hunkering down and building for the next [internet],” said Michael Litman, senior director of Web3 and NFT at Media.Monks.

What the data means for brands

While slumping prices are never a good sign, brands should understand that the most dramatic drops for NFTs are reflected in terms of U.S. dollars as opposed to cryptocurrency. The crypto market has experienced its own massive volatility as of late, and this has ultimately been factored into NFT data since most digital tokens are bought with crypto. The result is a ubiquitous lack of clarity on how much NFTs have lost in real value versus nominal value. For example, an NFT sold for 3 ETH on Jan. 19 equaled just over $9,000, but if that same NFT was sold for 3 ETH on May 19, it was worth only $6,000—a 33% drop in nominal value. 

What this means is that trading volume is not the best indicator of NFT demand. Instead, the key metric brands should be paying attention to is the number of active wallets, said Messari’s Nystrom. This number roughly translates to the number of active buyers in the NFT space, although numerous wallets could belong to a single buyer.

On a weekly basis, the present number of active buyers is similar to levels seen in mid-December, with roughly 112,000, according to Dune. Monthly numbers for the entirety of April were even higher than those of December, with over 350,000 buyers.

As for metaverse land NFTs, the number of active buyers on The Sandbox dropped roughly 47% in the first quarter of 2022, per Messari data. This slowdown has also impacted the secondary market, where the number of buyers has decreased by 54% compared to the previous quarter.

Read more: Metaverse glossary for brands

These drops reflect more of a correction from an overly strong boom period than a red flag, said Nystrom. During the fourth quarter of 2021, buyers flocked to purchase land in The Sandbox and other virtual real estate platforms, many in response to Meta’s re-brand in late October—a landmark moment in the validation of and investment in the metaverse. 

The Sandbox is also still in alpha testing, and brands and creators cannot yet launch experiences for users. Demand in its real estate and experiences will be more accurately reflected once the platform opens up to the public. 

Another takeaway for brands is that NFTs that depend less on speculative investing—and, thus, less on volatile market conditions—may find the most success with consumers, said Kai Tier, VP of technology at marketing company R/GA. 

Utility-focused NFTs offer special perks through ownership, such as access to promotions and real-world experiences, and have been launched by brands with committed Web3 strategies, like Adidas and Bud Light Next. The brewer, for example, deploys ticket giveaways through its Discord channel in an effort to keep holders of its Next NFT engaged, despite poor market conditions.

“For [brands] who are looking to actually offer value to consumers, the risk in terms of the slowdown isn't necessarily there,” Tier said.

How brands are responding

According to several brands, the turmoil in the NFT market has had a negligible impact on their efforts in the space.

“We don’t give a shit,” said Benoit Pagotto, co-founder of RTFKT, which was acquired by Nike in December. “If you start to look at what's happening every day, especially in crypto, there's something going down or up and you become over-excited or over-depressed and you [won’t] ever become anything. So we don't really look.”

Getty Images, which announced last week plans to create NFTs out of its photo catalog, has always approached the space with a long-term strategy in mind, CEO Craig Peters wrote in an email.

In the mass media category, Fox’s Blockchain Creative Labs welcomes volatility as a mechanism shaking out brands merely interested in a “gold rush,” chief executive Charlie Collier said in a recent press call.

Others are demonstrating slightly more sensitivity towards the poor market conditions by delaying their announcements and release dates to avoid timing that could be perceived as tone-deaf, said Dylan Hattem, VP at VaynerNFT. The Washington Nationals baseball franchise found this out the hard way when earlier this month it tweeted about its partnership with crypto project Terra at the same time Terra’s cryptocurrency was crashing.

Even brands that have experimented with NFTs previously but haven’t been as active in the space remain bullish on the assets. Sandwich chain Quiznos released its only NFT collection last November, but is currently exploring NFTs as a way to grant ownership over franchises in the metaverse, Mark Lohmann, president of Quiznos’ parent company Rego Restaurant Group, wrote in an email.

Read more about the Nationals' controversial crypto tweet. 

What agencies and NFT partners are saying

While most brands claim to be unfazed, agencies are taking this time to reassure their clients amid the bearish conditions.

“I think we're in a very uncertain time, and what we try to give to brands that we work with is certainty over a longer-term period,” said Media.Monks’ Litman.

The agency is encouraging its clients to learn more about their risk appetites in the space via educational workshops and “inspiration sessions,” which entail brainstorming marketing programs between clients and Media.Monks’ creative teams. These discussions often carry an emphasis on building a Web3 presence through tools beyond merely NFTs, such as virtual land.

Clients of R/GA have demonstrated a “healthy fear” driven by the present risks in the market, said Tier. But the company is also heading off these concerns with the reassurance—and something of a platitude in the cryptosphere—that the space is still nascent and volatility is to be expected. The knee-jerk conclusions surrounding this turmoil are overblown, said Tier.

“I think it's similar to what happens every time a jobs report comes out. You have analysts pulling out pieces of data that are convenient to their point of view, and presenting it in that way,” he said.

Both Media.Monks and R/GA claim brands are still showing a strong appetite in the space. NFT platforms Candy Digital and OneOf report levels of demand that are only growing, per their chief executives. 

“Most [of our] brand clients do not view NFTs as speculative instruments,” Lin Dai, CEO and co-founder of OneOf, wrote in an email. 

He added: “The biggest opportunity in NFTs is not washing trading by today’s “crypto whales” [largest holders] but rather, a steadfast commitment to deliver value to the mass market consumers.”

Read more: How finance brands should be marketing during stock market upheaval