Ethereum (ETH) Analysis: Can NFTs Regain 2021 Momentum in 2025?

Explore whether Ethereum’s NFT sector can bounce back to its 2021 peak, with market insights, tokenization trends and a look at real‑world asset platforms like Eden RWA.

• NFTs have seen a sharp decline since their 2021 boom.
• The article examines regulatory shifts, technology upgrades, and new use cases driving potential revival.
• Key takeaway: NFTs can recover, but only if coupled with real‑world asset tokenization and sustainable market practices.

Ethereum (ETH) analysis: whether NFTs can regain their 2021 momentum is the question that has investors, creators, and regulators debating since early 2024. The NFT space, once celebrated for its creative explosion, has suffered from inflated valuations, high gas fees, and a perception of speculative excess. Meanwhile, Ethereum continues to evolve with Layer‑2 scaling solutions, EIP‑1559 fee restructuring, and growing institutional interest in tokenized real‑world assets (RWA). For intermediate retail investors who want to understand whether the NFT market can return to its former vitality—and how that intersects with broader blockchain adoption—this article offers a detailed, data‑driven analysis. We’ll walk through historical trends, technical underpinnings, regulatory developments, and real‑world examples like Eden RWA, culminating in actionable insights for those looking to engage safely.

In the past year, NFT trading volumes have fallen by over 70% compared with 2021 highs, while daily active users on major marketplaces such as OpenSea and Rarible have plateaued. At the same time, Ethereum’s gas fees have stabilized thanks to roll‑ups, making minting and trading more affordable. However, the fundamental question remains: can this combination of lower friction costs and renewed investor confidence lift NFTs back to a sustainable level?

This article is aimed at crypto‑intermediate retail investors who already understand basic blockchain concepts but need a deeper understanding of market dynamics, risk factors, and emerging use cases that could signal a resurgence in the NFT ecosystem.

Background & Context

NFTs—non‑fungible tokens—are unique digital assets recorded on a blockchain, typically representing art, collectibles, or virtual real estate. Since their emergence in 2017 with projects like CryptoPunks and Bored Ape Yacht Club, NFTs have become a symbol of decentralised ownership and scarcity. Ethereum remains the dominant platform due to its mature smart‑contract ecosystem, widespread developer support, and extensive marketplace infrastructure.

In early 2025, several factors are reshaping the NFT narrative:

• Regulatory clarity: The European Union’s MiCA framework has begun classifying certain NFTs as financial instruments, potentially increasing compliance burdens but also providing legal certainty.
• Layer‑2 adoption: Optimistic and ZK roll‑ups have reduced transaction costs by 90%, lowering entry barriers for creators and collectors.
• Tokenization of real assets: Projects like Eden RWA are demonstrating how NFTs can be linked to tangible, income‑generating properties, enhancing intrinsic value.
• Creator monetisation tools: On‑chain royalties and dynamic pricing models give artists recurring revenue streams that were previously unavailable.

The convergence of these trends suggests a potential pivot from speculative hype toward more sustainable, asset‑backed NFT ecosystems.

How It Works

The lifecycle of an NFT on Ethereum can be summarised in four key steps:

1. Creation (Minting): A creator deploys a smart contract that defines the token’s metadata, properties, and royalty structure. The actual minting transaction records ownership on-chain.
2. Listing: Owners list NFTs on marketplaces such as OpenSea or Rarible. These platforms act as liquidity pools, matching buyers with sellers.
3. Transfer & Royalty Distribution: When a sale occurs, the smart contract automatically calculates and distributes royalties to the original creator based on pre‑set percentages.
4. Secondary Use Cases: NFTs can be wrapped for DeFi use (e.g., as collateral), fractionalised into ERC‑20 slices, or linked to real‑world assets via RWA platforms like Eden RWA.

Each step is underpinned by Ethereum’s consensus mechanism and a network of validators that ensure security. The inclusion of Layer‑2 solutions introduces an additional layer where transactions are batched off‑chain before final settlement on the mainnet, further improving scalability.

Market Impact & Use Cases

The NFT market has expanded beyond digital art into several high‑impact sectors:

In the realm of real‑world assets, tokenised properties provide liquidity that was previously inaccessible to small investors. By converting a villa in Saint-Barthélemy into an ERC‑20 token backed by an SPV (Special Purpose Vehicle), platforms can offer rental income in USDC directly to Ethereum wallets.

Risks, Regulation & Challenges

Despite the upside potential, several risks remain:

• Regulatory uncertainty: In the U.S., the SEC has yet to fully define how NFTs fit into securities law. MiCA introduces new compliance requirements in the EU.
• Smart contract vulnerabilities: Bugs or exploits can lead to loss of funds, as seen with the 2021 Poly Network hack.
• Liquidity constraints: Many NFT collections suffer from thin secondary markets, making it difficult to realise value.
• Environmental impact: Although Layer‑2 solutions reduce gas consumption, concerns about blockchain energy usage persist among regulators and investors.
• Market perception: The “bubble” narrative may deter risk‑averse participants even if underlying fundamentals improve.

Mitigation strategies include using audited contracts, diversifying across projects, and staying informed on evolving regulatory guidance.

Outlook & Scenarios for 2025+

• Bullish scenario: Layer‑2 scaling becomes mainstream, gas fees drop below $1 per transaction, and RWA tokenisation attracts institutional capital. NFT trading volumes rebound to >$10 billion annually.
• Bearish scenario: Regulatory crackdowns tighten compliance costs, leading to a withdrawal of major marketplaces and a sharp decline in secondary liquidity.
• Base case: Gradual adoption of Layer‑2 solutions combined with niche RWA projects stabilises the market. Trading volumes hover around $4–5 billion, with steady growth in creator royalties and fractional ownership models.

For retail investors, the base case suggests cautious engagement—prioritising projects with strong audit trails and clear revenue streams.

Eden RWA: A Concrete Example of NFT‑Backed Real‑World Assets

Eden RWA is an investment platform that democratises access to French Caribbean luxury real estate. By tokenising high‑end villas in Saint-Barthélemy, Saint-Martin, Guadeloupe, and Martinique into ERC‑20 property tokens, the platform offers a transparent, yield‑focused asset class on Ethereum.

Key features:

• SPV Structure: Each villa is owned by an SPV (SCI/SAS), ensuring clear legal ownership that can be represented on-chain.
• ERC‑20 Tokens: Investors receive tokens that represent fractional ownership, tradable on the platform’s in‑house marketplace.
• Stablecoin Rental Income: Periodic rental proceeds are paid out in USDC directly to holders’ Ethereum wallets, automating cash flow via smart contracts.
• Experiential Layer: Quarterly, a random token holder wins a free week’s stay at the villa, adding utility beyond financial returns.
• DAO‑Light Governance: Token holders vote on major decisions such as renovations or sales, balancing efficiency with community oversight.

Eden RWA illustrates how NFTs can bridge the gap between digital scarcity and tangible value, potentially providing a more stable foundation for NFT ecosystems to thrive.

Explore Eden RWA’s presale or visit the presale portal to learn how fractional ownership of luxury real estate is now possible on Ethereum.

Practical Takeaways

• Monitor Layer‑2 adoption metrics—gas fees, transaction throughput, and user activity.
• Assess the legal structure behind tokenised assets; SPVs or trusts are preferred for clarity.
• Check smart contract audit reports before investing in new NFT projects.
• Track royalty compliance to ensure creators receive their due shares.
• Evaluate liquidity by reviewing secondary market depth and average sale prices.
• Consider stablecoin payouts if you seek predictable cash flow from real‑world asset tokenisations.
• Stay informed on regulatory developments in your jurisdiction, especially MiCA and SEC guidance.

Mini FAQ

What is the difference between an NFT and an ERC‑20 token?

An NFT (ERC‑721 or ERC‑1155) represents a unique asset with no fungible counterpart, while an ERC‑20 token is fungible—each unit is identical and interchangeable.

Can NFTs be used as collateral in DeFi?

Yes. Wrapped NFTs can be deposited into liquidity pools or used as collateral for borrowing on platforms like Aave or NFTfi, though the process requires specialized contracts.

How do royalties work on Ethereum?

Royalty percentages are encoded in the NFT’s smart contract; when a secondary sale occurs, the platform automatically distributes the royalty to the original creator.

What risks are specific to RWA tokenisation?

Key risks include legal ownership clarity, custody of physical assets, regulatory classification as securities, and potential liquidity constraints in secondary markets.

Is it safe to hold NFT tokens in a hardware wallet?

Yes. Hardware wallets like Ledger or Trezor provide secure storage for private keys, reducing the risk of hacks compared to software wallets.

Conclusion

The NFT landscape is at a crossroads. While 2021’s speculative frenzy has subsided, emerging trends—Layer‑2 scaling, regulatory clarity, and real‑world asset tokenisation—offer pathways for sustainable growth. Ethereum’s continued evolution, coupled with platforms like Eden RWA that anchor digital tokens to tangible assets, can provide the credibility needed to attract both creators and investors.

Intermediate retail investors should focus on projects with strong technical foundations, clear revenue models, and transparent governance structures. By balancing enthusiasm for innovation with a disciplined risk assessment framework, participants can position themselves to benefit from a potential NFT resurgence without exposing themselves to unnecessary volatility.

Disclaimer

This article is for informational purposes only and does not constitute investment, legal, or tax advice. Always do your own research before making financial decisions.