The NFT market plummeted from a peak of $17 billion in 2022 to $2.4 billion in 2025, a decline of 86%. But after the speculative bubble burst, NFTs are transforming into foundational tools connecting physical assets, returning from financial speculation to their core functional essence.
(Background: The veteran blockchain summit “NFT Paris” announced its discontinuation, with community complaints about sponsors unable to refund)
(Additional context: Bear market NFT comeback! Fat Penguin pulls a sphere in Las Vegas: What phenomena are we seeing?)

Table of Contents

• NFT Market Supply and Demand Imbalance
• Platform Collective “Escape” and Evolution
• From “Tokens” to “Brands”
• Physical Endorsements and Functional Return
• What NFTs Have Died, and What Remains

NFTs did not suddenly collapse; they were gradually abandoned by the market over a sufficiently long period of decline. On January 5, the NFT Paris developer conference, originally scheduled for February, suddenly announced its cancellation. Once a lively party by the Seine, now only a cold official announcement tweet: “The market crash has dealt us a huge blow. Even with aggressive cost-cutting, we still cannot sustain.”

Five years ago, digital artist Beeple’s work “Everydays: The First 5000 Days” sold at Christie’s auction house for a staggering $69.3 million. Subsequently, from CryptoPunks trading at tens of millions of dollars to countless digital collectibles endorsed by mainstream institutions, that was the golden age of NFTs.

Image – Everydays: The First 5000 Days NFT

NFT Market Supply and Demand Imbalance

Explosion of supply. According to CryptoSlam data, the supply in 2025 increased by 35% compared to 2024’s 1 billion units. Over the past four years, the total number of NFTs soared from 38 million to 13.4 billion, a growth of approximately 3,400%.

Sales contraction. CryptoSlam data shows that the total NFT sales in 2025 were about $5.63 billion, down 37% from $8.9 billion in 2024. CoinGecko data indicates that the total market cap of NFTs fell from a peak of about $17 billion in April 2022 to about $2.4 billion at the end of 2025, a decline of approximately 86%. In 2025 alone, the total market cap shrank from about $9.2 billion in January to the end of the year, a 68% decrease within the year.

Liquidity dilution. As minting thresholds lowered, the market entered a “high-frequency, low-price” mode. CryptoSlam data shows that the average transaction price dropped from $124 in 2024 to $96 at the end of 2025. Compared to the peak of over $400 during the bubble in 2021-2022, this is a 75% decrease.

Image Source: CryptoSlam

Even top-tier NFT projects and blue-chip NFTs are not immune. Take CryptoPunks, for example, whose floor price has fallen to about 30 ETH, down 78% from the peak of 125 ETH in 2021; Bored Ape (BAYC) dropped 83% from about 30 ETH to around 5 ETH; Azuki fell 93% from about 12 ETH to 0.8 ETH.

Platform Collective “Escape” and Evolution

Industry leaders’ movements mark the end of this cycle.

Once dominant in the NFT market, OpenSea’s platform revenue has fallen from the golden era of $50 million to $120 million per month to less than $1 million.

Therefore, OpenSea announced a transformation, shifting from a simple “NFT marketplace” to a “Trade Everything” (Trade Everything) general on-chain trading hub, covering physical collectibles and tokens, and confirming plans to issue tokens.

The once-peak Blur, with its TVL continuously hitting new lows, saw its token price drop 99% from its high.

Similarly, Magic Eden, launched on Solana, after a year of operation, issued tokens. Affected by the NFT market downturn and bearish expectations, platform trading volume began to shrink, and the token price fell over 98% from its peak.

Even projects that failed to keep up with the times, such as veteran NFT marketplace X2Y2, have been eliminated, shut down entirely, with teams shifting focus to AI.

From “Tokens” to “Brands”

Amidst the bleak landscape, Pudgy Penguins successfully broke through the trend, becoming an industry anomaly. Their success was not based on complex token innovations or short-term speculation, but on transforming digital IP into physical consumer products, gradually building a sustainable brand ecosystem spanning Web3 and traditional retail.

Through CEO Luca Netz’s dual-income model, Pudgy Penguins deeply integrated IP licensing with physical merchandise. Their toys are now available in over 10,000 retail outlets worldwide, including Walmart (沃爾瑪), Target, and Walgreens. According to AInvest, this transformation has generated about $50 million in annual revenue, effectively offsetting the overall contraction of the crypto market.

Image – Pudgy Penguins toys on a Walmart shelf in the US

During Christmas 2025, Pudgy Penguins invested about $500,000 to project giant animations on the Sphere (圓球) in Las Vegas.

Image – Pudgy Penguins on the Sphere

This advertising campaign, targeting millions of visitors, avoided crypto jargon and NFT terms, instead presenting family-friendly IP images. Through brand exposure, it indirectly stimulated liquidity in the secondary market. Over the past 14 days, the NFT floor price increased by 25%, and trading volume rose by about 33%.

This shift from speculation to cultural operation seems to be becoming a consensus among industry survivors. Last May, Yuga Labs, the issuer of Bored Ape (BAYC), transferred the IP rights of top NFT project CryptoPunks to the non-profit Infinite Node Foundation, aiming to detach from the volatile, speculative nature and seek long-term artistic preservation and cultural management.

Physical Endorsements and Functional Return

Besides IP branding, NFTs are becoming foundational tools connecting physical assets (RWA).

Physical card trading. The platform Courtyard.io is changing the game. They store real Pokémon cards in certified insured vaults and tokenize them as NFTs. Within 30 days of late 2025, the platform processed over 230,000 transactions, generating about $12.7 million in sales, demonstrating strong market demand for high-liquidity, physically-backed assets.

Functional tickets. FIFA (FIFA) has also joined this camp, introducing “Priority Purchase” NFTs for the 2026 World Cup ticket sales. These NFTs are not for speculation but serve as verification tools to prevent scalper markups and price fraud in the secondary market.

What NFTs Have Died, and What Remains

NFTs are not “completely cooled off,” but they have indeed died once.

What died was the illusion of viewing NFTs as financial assets that could be minted and traded endlessly without regard to real-world value, solely based on narratives. In the face of infinite supply and limited demand, this path was doomed to be unsustainable.

What remains is NFTs’ role as a “certificate layer.” They are no longer required to generate value on their own but are embedded within IP brands, physical assets, and functional scenarios, serving as the foundation for rights confirmation, circulation, participation, and verification.

From Pudgy Penguins’ toy shelves, to on-chain circulation of physical cards, to anti-scalper mechanisms for World Cup tickets, NFTs are stepping back from the speculative stage and returning to a toolbox.

For the speculative NFT market, this is undoubtedly a winter. But for NFTs themselves, it is more like a rebirth after disillusionment.