A recent Chainalysis report reveals just 5% of NFT traders have received 80% of the profits generated so far this year on marketplace OpenSea.
It found just 20% of active wallets have initiated 80% of secondary NFT sales.
OpenSea has the highest trading volume by marketplace, with $16 billion in 2021 sales so far.
The report explains an exclusive set of elite traders have sole access to private pre-sales, where they enjoy a special discount.
They’re often the only ones to afford the most desirable NFTs. Prohibitively expensive tokens are statistically more likely to appreciate, as most NFT activity by dollar value occurs in the most expensive collections.
80% of NFTs sell for less than $10,000, Chainalysis notes. Yet sub-$10,000 NFTs account for just 11% of total trading volume.
The vast majority of these NFT transactions are at the retail level, transferring less than $10,000 in cryptocurrency. More than 80% of NFT-related transfers fall under this category. pic.twitter.com/j7oNe9OILb
— Chainalysis (@chainalysis) December 8, 2021
Hard-to-access elite groups most likely to profit
When smart contracts generate NFTs for initial buyers — during brief ceremonies known as minting events — a small group of NFT traders have the advantage.
A select few may snap up collectibles at a much lower price than others, a practice referred to as ‘whitelisting.’
This makes all the difference for profitability.
- A Bloomberg report found these advantaged traders profited three-quarters of the time.
- Regular NFT traders were far more likely to lose money, at a rate of 79%.
- Getting ‘whitelisted’ requires extensive social networking to gain access to exclusive online communities.
Adding to concerns, frenzied collectors often lose tremendous fees to the Ethereum network during congested minting events.
In July, buyers lost 310 ETH ($554,900) in fees during failed attempts to mint Stoner Cats collectibles. They received no refunds.
This is why I lost .2625 in gas. Had a mint fail because of this. I had plenty of eth to use.
— Boshi (@MAYCBoshi) July 28, 2021
Read more: OpenSea users lose pricey NFTs and crypto to fake support staff on Discord
An analysis of the problem indicated that the senders of those transactions did not limit gas allowance, which lets miners claim exorbitantly high amounts.
Others blamed the problem on Ethereum’s general failure to scale.
Big flops for NFT traders
So far this year, NFT collectors and traders have sent $26.9 billion to ERC-721 and ERC-1155 contracts, the most commonly used standards.
Elite NFT traders often quickly flip purchases for a profit –- usually within days of the NFT collections gaining a listing on secondary markets like OpenSea.
But a research paper recently published in Nature found that out of 4.7 million NFT transactions between June 2017 and April 2021, 66% of secondary trades fetched a lower price than the earlier purchase.
Bloomberg’s analysis from mid-June to mid-September proved that 73% of OpenSea NFTs were never resold — often because there is no bid for resale.
CryptoPunks was one of the few collections that could maintain relatively high popularity among NFT traders for several months, with $3 billion in transactions sustained since March 2021.
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