Nov 3, 2022 at 05:13Instagram plans to launch an NFT trading platform, Warner Bros. is releasing a collection on Game of Thrones, and OpenSea has rolled out a system that prevents trading in stolen NFTs. And that’s just in the last 24 hours. The market and industry of non-fungible tokens seems to be actively developing despite the ongoing crypto winter. But can we call it progress, or is it just a desperate attempt to actually survive? Let’s look into it.
What is happening to the NFT market right now?
The third quarter of 2022 was no exception, and so far, overall NFT sales have been down for the sixth consecutive month. According to CryptoSlam data, sales volumes could not even exceed $500M in October, which is the lowest since July 2021.
Third-quarter trading volume totaled $1.8B, down 80% from the same period in 2021 and down 76% from the second quarter of 2022. Experts say this may be because the market is still young and this is its first bear rally, so the new digital asset class hasn’t yet been able to adjust properly to the collapse.
According to the NFT communications strategist for CryptoSlam Yehudah Petscher, buyers and investors are still trying to figure out the bottom line and what long-term speculators value.
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“Is it utility? Is it rewards? However, we learn that only rarely do they value only JPEGs. The market is proving that few of these JPEG-only projects will survive the crypto winter,” he said.
The industry is also significantly influenced by the U.S. Federal Reserve, which continues to raise interest rates and urges central banks to do the same. For this reason, investors prefer to take less risk and buy fewer NFTs until the situation is resolved. And when that will be is another question.
What will happen next?
Because of inflation, the Fed has already raised interest rates to 3.25% and plans to raise more until the rate drops from 8.2% to an acceptable 2%. And the next hike could come as soon as the Federal Open Market Committee meeting.
Other reasons also prevent the development of the industry. For example, the company Yuga Labs, creator of the popular NFT collection Bored Ape Yacht Club, at the moment is under investigation by the SEC. The project is suspected of having unregistered offers. This situation could not help but affect the value of the pictures. Over the past week, NFT trading volume from the collection is down 15% and sales are down 4%.
No matter how you look at it, the Ethereum blockchain remains the most popular among NFT enthusiasts for now. However, Solana is not far behind and comes on the heels of Buterin’s brainchild. So, the volume of secondary sales of NFT based on SOL since the beginning of August reached about $500M. The average cost per picture was $1.5K. This is a record for Solana, but it is still a long way from Ethereum, whose secondary sales were over $2.2B.
According to CryptoSlam analysts, Solana ranks fourth in terms of per-day sales. Here’s who’s ahead of it:
- Ethereum — $37.7M;
- Ronin — $23.5M;
- Wax — $4.5M;
- Solana — $1.9M.
At the same time, the NFT marketplaces continue to struggle for volume. For example, OpenSea keeps integrating new features into its marketplace. The latest in the marketplace added support for the Avalanche blockchain, as well as introduced a system to minimize NFT theft. The main competitors of OpenSea are still Magic Eden and X2Y2, which have been gaining more momentum lately.
However, the technical toolkit may not be enough to get investors to trade more. According to Petcher, developers of various projects may have to come up with something innovative and develop a collectible token ecosystem rather than the usual speculation for the market to grow. At the very least, they will have to think through and prove the practical value of their projects — ordinary pictures won’t surprise anyone anymore.
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