Where Is All This Money for NFTs Coming From?

March 2, 2022 - 6 min read

A lot of money is being spent on NFTs. Where is it all coming from? I have some theories and ideas.

Where Is All This Money for NFTs Coming From?

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The interesting dynamic that may explain the eye-popping amount of money spent on NFTs

Last August, I did some analysis based on active wallets on OpenSea and the amount of money spent in a 30-day time period. 134,750 active users spent $1.48 billion in that 30 days, amounting to $10,983 in spending per buyer.

How are so many people able to spend $10k, $20k, $30k, or even millions of dollars on NFTs?

Well, let’s do some analysis that might help explain where the money is coming from:

To do this, it is important to know that Ethereum was released on July 30th, 2015.

By October 2015, the price of 1 Ether dropped to $0.42 per and didn’t hit $1 until January 2016.

That means you could have bought 100 Ethereum for $40.20 in October 2015.

If 1,000 people paid $40.20 for 100 Ethereum each in 2015 and decided to spend it on NFTs, that would be 100,000 Ethereum.

Ethereum is hovering around $2,700 - $2,800 so 100,000 Ether is now worth about $275 million.

If 1,000 people paid $400.20 for 1,000 Ether each, that would be 1,000,000 Ethereum worth $2.75 billion.

I have not been able to find good data about the number of Ethereum holders (and volume) from 2015, 2016, etc., but it is safe to say that there are a group of people who realized outstanding gains and have eye-popping sums of money to play with.

We do, however, know the market cap (the total number of Ethereum multiplied by its current price) of Ethereum at different points in time.

In April 2017, the market cap for Ethereum was $7.21 billion.

By August 2017 it shot up to over $36 billion at a price of nearly $300 per coin.

OpenSea hit $5 billion in revenue in February 2022. While we know that more people are buying Ethereum at current values, it is possible that the entire market cap of NFTs (projected to be $80 billion in 2025) could be paid for by significant gains from early investors.

In January of 2022, it was reported that more than 68 million Ethereum addresses hold a balance.

Lots of people (including myself) have multiple wallets, so this doesn’t mean that 68 million individuals now hold Ethereum, but the number is significantly higher than it was and more money is pouring in.

My bet though is that gains made from Ethereum price changes are seen as “play money” and the explosion of NFT values in 2021 was due to the fact that people had plenty of extra ETH to play with from buying in early.

Rising values of NFTs sparked outside interest, which got some people into NFTs early on (early to mid-2021). Those early buyers experienced large gains that kept feeding the ecosystem. For example, if someone bought a Bored Ape Yacht Club NFT for $200 during mint and made $250k in the current market, they might be willing to spend $100k of that profit on other NFTs.

These arbitrage dynamics helped provide a foundation of funds to kickstart the NFT market. $100,000 is $100,000, but if you bought Ethereum at $1, 30 ETH may feel like nothing to you.

And I think there are a whole lot of people who bought Ethereum at a much lower price than it is today.

Remember the price per spend I estimated at the start of this newsletter?

It’s likely that 20% of those buyers accounted for 80% of those NFTs purchases (I’ll explain why in the section below). So about 27,000 wallets (20% of 134,750) likely spent about $1.18 billion, which is $43,851 per wallet.

Now we can hypothesize that people spending nearly $44k in 30 days on NFTs probably made that money from the increase of value in cryptocurrency or NFTs they purchased earlier in the year.

The Pareto Principle

In the least surprising news of all time, about 80% of NFTs are held by 17% of wallet addresses.

If you aren’t familiar with the Pareto Principle, this is a fun (and eerily accurate) principle that will show up in a lot of areas of your life.

For the majority of outcomes, 80% of consequences come from 20% of causes.

E.g.: 80% of your revenue comes from 20% of your clients

E.g.: 20% of the population owns 80% of the land

E.g. 20% of the population holds 80% of the wealth

Even the top 20% of NBA players score about 80% of the points.

You’ll see this pattern pop up over and over again.

So, 17% of wallets owning 80% of NFTs isn’t surprising. It also wouldn’t be surprising if 20% of wallets hold 80% of Ethereum.

OpenSea hit $5 billion in volume in February, but this isn’t likely $5 billion of brand new money coming in from savings accounts. It’s likely that a good portion of the money spent was extra money from gains of the increased Ether value.

This is not a bad thing. In fact, I think it gave NFTs the injection they needed to gain real market traction. The key now is sustainability and that goes back to mainstream popularity, utility, interest, and the market. To put it simply, are people willing to spend money not made from historical gains on NFTs?


I don’t think many people are digging up the $40,000 they buried in their yard two years ago to convert to Ethereum and buy NFTs.

I think the 17% who own so many NFTs got into Ethereum early, at $0.42, $1, $100, even $1,000, and were able to take life-changing profits and buy a seemingly endless supply of NFTs.

This isn’t fake demand, but it may be artificially inflated and temporary because 1,000x gains for Ethereum could be over.

At some point, the extra “free” money will run out.

If you are interested - you can look at the top Ethereum holders here. Note that some wallets are exchanges, but there are multiple wallets with hundreds of thousands of ETH.

The dynamics of USD —> Ethereum —> NFTs create interesting opportunities.

Good traders (I don’t recommend this unless you really know what you are doing) can profit from price fluctuations in ETH and spend it on NFTs without much worry.

Again, $40,000 is $40,000, but if you made $400,000 on an investment, it doesn’t feel like you are paying an annual salaries worth of money for an NFT. It just feels like you are taking the free money you earned to buy something you like.

But if you aren’t one of those people who made historical gains on the price of Ethereum or NFTs early on, please be careful. The free money in the market was at its highest point in early 2021 and will slowly decrease as more is spent on the market and taken out of NFTs. Relative buying power will also shrink as the market gets bigger with more and more projects.

Jon Torrey

written by

Jon Torrey

NFT Enthusiast


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