NFTs
Are memecoins the cause of low prices in the NFT market?
It appears that there may be an inverse correlation between the memecoin market and the NFT market, with the prices of these two types of assets moving in opposite directions.
In particular, the memecoin market may be the cause of the NFT market suffering sharply at the moment.
NFT Price Drop: Is It the Memecoin Market’s Fault?
Comparing the trend of the memecoin market over the past few months with that of NFTs, there actually seems to be an apparent inverse correlation.
Using the graph From CryptoSlam’s monthly NFT sales volumes, it is observed that from June 2022 there was a real collapse.
Since then, the lowest point was recorded in September 2023, with just 300 million dollars in monthly trades.
In particular, after a brief and contained peak in December 2023, during 2024 daily trading volumes of NFT remained above 25 million until April, then fell between May and June to just over 10 million.
In fact, the monthly trading volume for the recently concluded month of June was only $462 million, which is much lower than the $1.7 billion in December 2023.
In other words, monthly volumes throughout the year went from $1.7 billion in December 2023 to $462 million in June 2024, with an almost constant drop of 74%, concentrated mainly in the last two months.
Memecoin market pushes NFT prices lower
Many meme coin instead, in 2024, they performed well.
Taking the gains or losses of December 31, 2023 as a reference, for example, Dogecoin is at +40%, Shiba Inu at +66%, Pepe even at +725%, and Floki at +363%.
Even the new WIF (dogwifhat) recorded a sensational +1,300%, while Bonk stops at +77%.
These numbers as a whole seem to indicate a possible capital flight from the NFT market to the memecoin market.
However, if only the last 30 days are considered, the inverse correlation does not appear to exist.
The market prices of all six major memecoins in June lost between 21% and 35%, with overall movements decidedly similar to each other.
Monthly trading volumes on the NFT market in June decreased by 25% compared to May, representing a drop of the same order of magnitude as memecoin prices.
Prices and volumes
However, you should not compare prices with volumes, as they are two different things.
However, it is possible that a decrease in NFT sales volumes corresponds to a decrease in prices, as volumes are calculated by multiplying prices by quantities.
So, if on the one hand there does not seem to be a direct correlation, the hypothesis circulating is that in the second quarter of the current year, taken as a whole, a wave of new memecoins about VIP, politics and animals may have diverted capital from the NFT market , and the decline of the cryptocurrency market did the rest.
It is worth noting that the overall NFT market volumes in June were still lower than the lowest monthly peak in 2022, the year of bear marketand this suggests that there may be something of a lag between this market and the memecoin market.
On the other hand, for example, the all-time peak in monthly NFT trading volume was recorded in January 2022, a good two months later than the cryptocurrency market.
The hypothesis of the co-founder of Animoca Brands
On a recent interview Animoca Brands co-founder and executive chairman Yat Siu said he believes the NFT market can recover.
He said it shouldn’t take a new speculative bubble to see this market recover, because NFTs can also be used in gaming, for intellectual property rights and for many other things, and this could generate demand.
However, from his words, it is clear that the boom in the NFT market has already occurred and there do not appear to be conditions for a true and proper new boom in the short term.
On the other hand, however, it considers it illogical that monthly trading volumes are so low, blaming it mainly on the summer period. In fact, he believes that when market activity resumes, more volumes, trades and activity will be seen.
This hypothesis could also explain why even major memecoins performed poorly in June.
The market recovery
A recovery in the memecoin market, after the general decline in June, is expected by many.
It is not certain that the usual memecoins will always perform well, as new ones are constantly being created and sometimes they manage to become successful and attract capital that does not flow to other memecoins.
It is also possible that during periods when memecoins – especially new ones – attract a lot of capital, this will also be drained from the NFT market, and it is possible that the summer will not be a particularly bright period for financial markets as a whole.
For example, as early as June 2021 there was a drop in monthly NFT volumes, but July saw the first major boom. June 2022 was a bloodbath, but there was the implosion of the Terra/Luna ecosystem. In 2023, the drop lasted eight consecutive months, from March to October.
All of this makes it possible to imagine that sooner or later this market could recover, although perhaps, as Yat Siu says, we will have to wait for a wider and more massive use of NFT technology, even beyond the art market.