An analysis of music NFT secondary sales and trading activity from late 2021 to mid-2022, to provide a more in-depth and nuanced understanding of NFT markets
especially when fans' wallets are on the line. @water_and_music : In our latest research, we analyze collector and sales activity for 7 music NFT projects from @SnoopDogg , @matthewchaim + more, including key considerations around ensuring the longevity of an NFT release. You can read our analysis for FREE here: https://www.waterandmusic.com/ ... @water_and_music : Perhaps the most striking takeaway from this study was how secondary sales mechanisms effectively incentivize NFTs changing hands multiple times. How can artists balance the profit generation of secondary sales with the need to create a stable community around their work? @water_and_music : One of the flagship functionalities of NFTs is their ability to generate revenue for their creators long after their primary sale. But despite this, there's been little clarity on what artists who release music NFTs can reasonably expect from secondary sales. @water_and_music : In fact, a recent Nature article found that only 20% of tokens in their dataset of 4.7 million NFTs had any secondary sales at all. Why are so few NFT projects able to leverage this unique and potentially game-changing feature? See also Mediagazer
Context & Ripple Effects
Music NFTs arrived as a headline revenue story in 2021 — $42.5M in sales within months, with musicians splitting proceeds evenly with visual artists — but the market-wide picture was murky: Bloomberg found most OpenSea assets went unsold a second time, and a Nature dataset showed only 20% of 4.7M tokens ever had any secondary sale at all.
This Water & Music study cuts against that illiquidity narrative: across 7 projects including Snoop Dogg's and Matthew Chaim's, secondary sales mechanisms actively pushed tokens through multiple hands. That makes music NFTs an outlier worth studying — and it lands just before infrastructure bets like Sound's $20M Series A doubled down on exactly this minting-and-trading model.
First-order effects
- Artists on these 7 projects collect royalties on every resale, but the same mechanics that reward them also encourage flipping — so the direct trade-off is between short-term royalty income and fans who hold rather than trade.
- Collectors on these projects are effectively participating in a liquid secondary market, unlike the majority of NFT buyers elsewhere whose assets never change hands again.
Second-order effects
- NFT music platforms like Sound now have empirical evidence that royalty and resale design shapes trading behavior, making contract structure — not just artist name — a competitive differentiator when courting artists.
- The contrast with the broader market's dead inventory pressures other music NFT issuers to engineer liquidity (royalty splits, drop mechanics) or accept their tokens becoming pure souvenirs, the framing music fans already favored over gamers' extractive model.
Third-order effects
- If music NFTs keep behaving like tradable micro-assets rather than memorabilia, artist-fan relationships structurally financialize: fanbases become liquidity pools, and release design optimizes for turnover as much as for listening.
- Sustained secondary activity also gives labels and scouts a new signal alongside streaming data — which already filters who gets signed — potentially extending A&R judgment to an artist's token-market performance.
The trend: Music NFT releases are evolving from one-off drops into deliberately engineered secondary markets, where royalty mechanics determine whether tokens circulate or die on the shelf.