Bearish sentiment in the crypto markets has trickled down to the NFT subsector.
Over the past 30 days, NFT sales volume across the top 10 blockchains has fallen, according to data from NFT aggregator CryptoSlam. The biggest decline recorded was around 80% on BNB, or $19.19 million, while the smallest decline was around 5% on Palm, or $1.96 million in sales volume.
“The NFT market has not been great, but there is still great momentum,” Nick O’Neill, CEO and co-founder of The Nifty, said to TechCrunch.
Why the sunny outlook when some NFT metrics are falling? Unit sales are almost flat month over month, placing them near peak all-time levels, O’Neill noted, while the average price of a sold NFT has imploded. “Based on my own data, the average NFT sale price on OpenSea has dropped from $1,714 in April to $214 in July, [an] 88% decline.”
It’s also hard to ignore bearish macro headwinds, O’Neill said. The majority of NFTs are Ethereum-based, and the average price of ether has fallen 28.7% from $1,514 to $1,080 over the past 30 days, which in turn has reduced the value of down NFTs tied to the cryptocurrency.
NFTs are more volatile assets and are not immune to movements in both the macro and crypto markets, Brian Cho, general partner and co-founder at Patron, said to TechCrunch.
“NFTs are a risk-on asset class that is highly correlated to ETH, which in turn is highly correlated to publicly traded equities” Josh Bobrowsky, CEO of Parzival Fund, said to TechCrunch. The top 5% of projects are maintaining relative value in terms of ETH, although they’re still down dramatically in U.S. dollars, Bobrowsky added.
“We’re still in an ongoing crypto bear market, which has been 75% top to bottom so far. And a number of exchanges have basically been decimated, damaging confidence in the crypto space as a whole,” O’Neill said.
Buyers and communities holding on
With all this said, there’s a silver lining, Cho said.
“Despite trading volumes being down, what NFT collectors consider as quality assets like CryptoPunks, Nouns, Autoglyphs and certain Art Blocks Curated have appreciated in price as the collector market has been rotating toward those,” Cho said. “Even [profile picture] NFT projects like Moonbirds and Bored Apes have largely recovered from their lows in ETH terms.”
Floor prices for some of the top projects have held steady, signaling that the NFT market, specifically projects with an engaged community and treasury, may be able to better outlast the current down cycle, Cho noted.
Half of the 10 biggest NFT collections by sales volume increased over the past 30 days, while the other half decreased. The largest NFT collection, Bored Ape Yacht Club, declined about 27% to around $69.64 million in sales volume during the past 30 days.
“The NFT market volumes are decreasing across the board for most collections, besides the more recent niche collections like some free mints, for example,” Ty Blackard, co-founder at NFTY Labs, said to TechCrunch. “This is primarily due to the overall market conditions, people needing liquidity to hold up leveraged positions, pay rent, etc.”
Although the sales volume has fallen across the top 10 blockchains, there was about $666.23 million in sales across 507,553 buyers, indicating there’s still a strong demand and audience for the relatively nascent space, the data shows.
“Despite all of this, we’ve seen a lot of activity in NFTs with minimal relative reduction in traders and, as I said, continued unit sales,” O’Neill said. “This is also a tiny market with less than 400,000 active wallets trading ETH NFTs last month. So yes, volume has dropped on a dollar basis, but for a crypto market that otherwise appears in shambles, I continue to find NFT sales activity surprisingly strong.”
In general, it seems NFT holders and fans alike have been unbothered by the crypto market volatility as thousands of people flocked to NFT NYC late last month and partied through the pain.
During that time, the NFT marketplace Magic Eden raised $130 million in a Series B round, bringing its valuation to $1.6 billion. The nine-month-old company also threw a joint “Degen Yacht Party” with Solana-focused crypto wallet Phantom during the conference, showing the two firms probably aren’t too worried about cash right now.
While many valuations are dropping across all industries — crypto included — Magic Eden’s increased value speaks to investors’ confidence in the NFT market. “It has been a fast and wild ride,” Jack Lu, CEO of Magic Eden, said to TechCrunch at the time. “There was a huge amount of [NFT] growth in the last cycle, but this is nothing compared to the headroom and growth potential in the future.”
As of today, Lu said his team has noticed lower sales volume as a result of broader macroeconomic headwinds.
“We have seen users transacting more actively than ever,” Lu commented. “Low entry prices have boosted transaction counts on our secondary marketplace, where we saw a 24% growth in secondary transactions between June versus May. We also noticed new entrants to the community and recorded a 15% growth in unique wallet users between April and June.”
Scratching the surface
“We have only scratched the surface of NFTs’ utility,” Shiti Manghani, CMO at the walk-to-earn Solana-based app STEPN, said in an email to TechCrunch. “So what are the key characteristics that ripen them for utility? They are: transparency, indivisibility, transferability and interoperability. And their use cases can be broadly (a) secular — limited to ecosystem NFT projects or (b) broad — which have applications for humanity at large.”
Examples of secular use cases would be staking, exclusive benefits, redeemability, breeding, memberships, etc., Manghani said. “This is phase one. As we move into the next phase of broad utility, we unlock their true potential with authentication, IP, real estate, ticketing, voting, insurance, music, etc.”
Most of the value proposition is based on “ponzi-nomics,” where a lot of the value is circulated within the ecosystem, Blackard said. “But to truly thrive, these collections need to find value outside their ecosystem.”
So, the current conditions for NFTs will likely continue, especially until the market finds some stability, Blackard said. “In sideways markets, I still think some blue-chip NFTs can do well because of their collectible and membership nature.”
So what can turn the ship around? More use cases that utilize value outside of the ecosystems and market stabilization, Blackard said.
As the tech matures, there will be more use cases discovered, Manghani said. “As the utility grows, so will the adoption. It’s an inevitability. After all, if tokenomics lay the foundation of web3, NFTs are the bricks in its walls.”