"Assets with identifiable economic functions are easier to evaluate than those driven primarily by resale dynamics." Efstathios Polyzos | Image source: CCN/ Derek Fenech
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Key Takeaways
The decline in NFT trading volumes reflects the removal of speculative distortions such as wash trading and short-term flipping, not the collapse of NFTs as a technology or market category.
Lower volumes improved price signals, making transaction data more reliable for observing real demand, longer holding behavior, and functional ownership patterns.
NFT utility is now observable in use cases such as gaming, ticketing, authentication, and rights management, where value depends on usage, access, and integration rather than resale frequency.
While data gaps and regulatory uncertainty remain, the post-hype NFT market allows clearer evaluation of projects based on economic function and sustained demand rather than narrative momentum.
NFTs didn’t collapse; their utility finally became measurable
The sharp decline in non-fungible tokens (NFT) trading volumes is often cited as evidence that this asset class has failed to make its case to investors and enthusiasts.
Academic research has recently presented evidence why the non-fungible tokens market should be avoided. This view mixes up the failure of speculation with the failure of the technology itself.
During the peak of the NFT boom, prices and volumes were heavily distorted by washtrading, promotional activity and short-term speculation, driven primarily by an early-adoption hype.
As these distortions receded, what remained was a smaller but more informative market in which genuine demand, functional use cases and clearer price signals could finally be observed.
The apparent downturn does not suggest a failure, but a transition toward measurability and economic value.
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Declining NFT trading volumes are often interpreted as a sign of market failure, according to experts. However, in speculative environments volume alone is a poor indicator of underlying value.
During the NFT boom, exceptionally high turnover reflected rapid flipping, promotional trading and artificial activity rather than justified and sustained economic use.
Volume measured attention, not utility and, thus, when speculative incentives weakened, much of this activity disappeared, causing a sharp contraction in headline metrics.
But this contraction did not destroy functional demand; current lower volumes indicate improved signal quality rather than a generalized market collapse.
The transactions that remain (and the corresponding prices) reflect genuine user interest, longer holding periods (as demonstrated in the figure below) and purposeful ownership.
This distinction matters because markets built on speculative resale dynamics alone cannot support long-term value creation.
Author’s calculations | Source: OpenSea API transaction data
Washtrading was among the most significant practices that fueled the rapid expansion of NFT markets.
Wash Trading and Artificial Growth in NFT Markets
Washtrading distorted prices and perceived demand. In the NFT market, wash trading occurs when a closed group of wallets trades digital assets among themselves without real changes in ownership or use, inflating transaction volumes and creating the illusion of market interest, as academic papers have pointed out.
These practices were facilitated by low transaction costs and marketplace incentive structures that rewarded volume rather than genuine participation.
As a result, figures such as total sales and average prices often reflected strategic behavior rather than organic demand.
This environment makes it difficult for participants to distinguish between assets that hold functional (or cultural) value and those supported by artificial liquidity.
Much of this activity has now disappeared and what followed was a sharp decline in volumes, not because demand vanished, but because previously inflated signals were removed from the market.
How NFT Market Signals Became More Reliable
As this speculative activity declined, the structure of NFT markets began to change in ways that improved the quality of observable signals.
Price reliability: Fewer short-term traders and less artificial volume have rendered transaction prices a more reliable proxy of actual willingness to pay.
Behavioral shift: Holding periods have lengthened and transactions decreased, patterns consistent with a shift away from previously observed market structures.
Wash trading decline: Lower activity also reduced the incentive and effectiveness of washtrading, making remaining trades more informative for market participants and observers.
Utility signals: In this environment, prices now demonstrate relative scarcity, usage value, and community engagement, in other words, actual utility.
What is more important is that this transition can permit meaningful differentiation between assets that rely on hype and those with an identifiable economic function, simply by observing which projects retain demand.
NFT utility can be seen more clearly (albeit with lingering measurement challenges) in contexts where ownership serves a clear functional purpose.
How NFTs Create Measurable Utility Across Real-World Use Cases
In digital gaming, and according to expert views in the field, NFTs increasingly represent in-game assets that confer access, status or capabilities rather than resale opportunities.
Studies focused on luxury and collectibles markets have pointed out how these are used for authentication, provenance tracking, and after-sale services, linking digital records to physical goods.
Ticketing and membership models can also provide measurable utility, where NFTs may function as access credentials with defined rights and time-bound use, rather than speculative value.
In these settings, success is reflected in usage adoption, retention and integration into broader platforms.
This shift allows utility to be assessed through observable behavior and by focusing on how people use NFTs (rather than how often they trade them) the market now provides clearer evidence of economic relevance and value.
It also creates space to identify and evaluate NFT use cases on their functional merits, rather than dismissing the entire asset class under the broad label of speculation.
Why This Shift Matters Beyond Crypto Markets
This change in NFT markets has implications that extend well beyond the crypto ecosystem.
Functional transition: As NFTs move from speculative instruments toward functional digital assets, they offer a practical framework for ownership, verification and rights management in both digital and physical contexts.
Expanded applications: Beyond creative industries, NFTs are increasingly explored in asset tokenization, property- and land-related transactions and so-called phygital applications that link digital records to real-world assets.
Ownership infrastructure: In these settings, NFTs can serve as verifiable representations of ownership or contractual claims, reducing reliance on fragmented intermediaries.
This is relevant for creators and consumers, but also for institutions and public bodies seeking more transparent and auditable mechanisms for managing rights and transfers.
Regulation in a Post-Speculation NFT Market
There are also implications for regulators, as the shift toward observable utility changes the nature of oversight.
Assets with identifiable economic functions are easier to evaluate than those driven primarily by resale dynamics, reducing ambiguity around consumer protection and market integrity.
More broadly, the ability to distinguish speculative noise from functional value is essential for building trust in digital markets.
Efstathios Polyzos says “the decline in NFT trading volumes marked the end of hype- and speculation-driven growth, not the failure of the technology itself.” | Source: Efstathios Polyzos
When utility becomes measurable, markets can assess NFTs by economic and social value rather than narratives, allowing clearer participation, governance, and identification of use cases with real impact.
Limits, Risks, and What Remains Uncertain
Despite the important signs of gradual market maturity, I still note significant limitations in NFT markets.
Many projects still lack sustained user engagement while market fragmentation across platforms and blockchains continues to hinder interoperability and consistent standards.
This has an impact on data quality also which remains uneven, with limited disclosure around usage metrics, ownership concentration and secondary market dynamics.
Why Measuring NFT Utility Remains Difficult
These constraints make it difficult to compare or scale utility and thus limit broad conclusions about long-term viability across the entire sector.
In addition, regulatory frameworks are still evolving, creating uncertainty for creators, platforms and users.
Developments such as the establishment of the Virtual Assets Regulatory Authority (VARA) in the UAE, as well as the introduction of the Markets in Crypto-Assets (MiCA) framework in the European Union, illustrate ongoing efforts to clarify oversight but still leave important implementation questions unresolved.
This uncertainty does not fully negate emerging utility, but it does caution against generalizing from isolated successes.
NFT Market Maturity After Speculation and Hype
The post-hype environment is more informative, but it is also more selective, revealing which applications can function under scrutiny and which cannot.
The decline in NFT trading volumes marked the end of hype- and speculation-driven growth, not the failure of the technology itself.
As the distortions that inflated prices and activity dissipated, the market has made utility observable for the first time.
This transition now permits us to evaluate NFTs on economic function rather than narrative momentum, a necessary step for any emerging financial asset seeking long-term relevance.
Disclaimer:
The views, thoughts, and opinions expressed in the article belong solely to the author, and not necessarily to CCN, its management, employees, or affiliates. This content is for informational purposes only and should not be considered professional advice.
About the Author
Dr. Efstathios Polyzos
Dr. Efstathios Polyzos is Associate Professor of Finance and Associate Dean at Zayed University’s College of Interdisciplinary Studies. His research focuses on digital asset markets, market efficiency, behavioral finance and the use of large-scale data and machine learning in financial analysis. He has published papers on cryptocurrencies, NFTs, ESG finance and financial instability in leading academic journals. His work examines how market structure, data quality and investor behavior shape outcomes in emerging financial systems. He also contributes to interdisciplinary initiatives linking finance, technology and public policy.
