NFT Market Crashes 63% Since December While AI Collections Show Resilience

TLDR

• NFT trading volumes plummeted 63% since December, with February seeing a 50% drop from January to $498 million
• Profile picture NFTs remain most popular with $243M in trading volume, followed by gaming NFTs ($41M) and sports NFTs ($7.7M)
• AI-powered NFTs are gaining traction despite the market downturn, with collections like Kaito Genesis seeing significant growth
• February 2025 set a record for crypto hacks with $1.5 billion stolen, primarily from the Bybit exchange hack ($1.4B)
• The overall Web3 activity cooled with daily active wallets dropping 8% to 24 million, though AI-related dapps surged with some platforms growing over 700%

The non-fungible token (NFT) market has experienced a dramatic decline since the end of 2024, with trading volumes plummeting 63% from December to February. This steep drop coincides with broader cryptocurrency market volatility.

Data from DappRadar shows that NFT trading volumes hit $1.36 billion in December before falling 26% in January. February saw an even steeper decline of 50%, bringing the total volume down to $498 million.

DappRadar analyst Sara Gherghelas attributed the downturn to the correlation between NFT valuations and crypto prices. This connection became clear as the market capitalization for cryptocurrencies reached an all-time high of $3.71 trillion on December 9, 2024.

Bitcoin briefly surged above $109,000 on January 20, breaking its previous high. However, most crypto market gains were lost in February amid uncertainty regarding US President Donald Trump’s tariffs on trading partners.

The NFT decline is part of a broader cooldown in decentralized applications (dapps). Total daily unique active wallets declined by 8% in February, dropping to 24 million users across all tracked platforms.

Despite the general downtrend, NFT activity showed some positive signs. The number of users interacting with NFT platforms grew by 6% in February, reaching 3.5 million, indicating continued interest despite lower trading volumes.

Profile picture (PFP) NFTs dominated the market in February. They generated $243 million in trading volume across 76,385 sales, with 99% of transactions occurring on the Ethereum blockchain.

Gaming NFTs secured the second position with $41 million in volume and 421,853 assets traded. Sports NFTs led in terms of total sales count with 659,097 transactions, though at a lower volume of $7.7 million.

AI and Utility Amid the Decline

A bright spot in the NFT landscape is the growing integration with artificial intelligence. AI-powered NFTs are gaining popularity as they offer more dynamic and interactive features with enhanced utility.

Kaito Genesis, an AI-driven collection by digital asset search engine Kaito AI, saw major growth in February. Its floor price reached an all-time high of 7.65 ETH, driven by strategic collaborations including a partnership with the Azuki NFT team.

Another standout project is Tokenized Collectibles by Courtyard. This innovative platform bridges physical collectibles with digital assets by storing real-world items in secure vaults and minting them as NFTs on the Polygon blockchain.

Dobby Fingerprints emerged as the top collection by number of traders. The project introduces a novel approach allowing NFT holders to claim fingerprint keys within Dobby, described as the “world’s first Loyal AI model.”

The broader Web3 landscape also faced challenges in February. DeFi (decentralized finance) saw its total value locked drop from $217 billion to $168 billion as capital flowed out of major platforms.

February also marked a dark milestone for crypto security. A record-breaking $1.5 billion was stolen through hacks, with the Bybit exchange breach accounting for $1.4 billion alone—making it the largest DeFi exploit in history.

Despite these setbacks, AI-powered applications within the Web3 space showed remarkable growth. Some AI dapps experienced over 700% increase in user adoption, with LOL emerging as the most-used AI platform with 5.1 million active wallets.

Looking back at 2024, NFTs had their worst year since 2020. The market recorded $13.7 billion in trading volume and under 50 million in sales, according to DappRadar’s January report.

This performance stands in stark contrast to 2022, when NFTs first burst into the mainstream. That year saw trading volumes reach $57.2 billion with 121.7 million total sales.

Industry experts suggest that the future of NFTs may depend on utility rather than speculation. “While speculative trading may fluctuate, NFTs with strong utility, engagement, and real-world applications will drive long-term adoption in Web3,” noted Gherghelas.

The evolving NFT landscape reflects the maturation of the market. As the initial hype subsides, projects that offer genuine value through technological innovation or practical applications may have the best chance of long-term success.