NFTs
Why NFTs are seeing a 66% drop in trading even as Ethereum soars – DL News
- NFTs based on the Ethereum blockchain have seen double-digit losses.
- Changing investor appetite, lack of utility and high gas fees are key factors.
- Prices could start to rise as money moves out of major cryptocurrencies.
Ethereum, the second largest cryptocurrency in the world, is in crisis. The same cannot be said for non-fungible tokens, or NFTs, on the network.
Popular NFT collections including DeGods, Azuki, Pudgy Penguins, and Bored Ape Yacht Club have seen double-digit losses over the past seven days.
Meanwhile, Ethereum is up 11% over the same period.
So what happens?
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“We are witnessing the first real bear market for NFTs, revealing a decoupling from their underlying asset, Ethereum,” said Alex Casassovici, founder of web3 streaming project Azarus. DL News.
NFT trading volumes have plummeted about 66% over the past year as investors turn to Bitcoin and Ethereum, both in the midst of yet another breakneck recovery, Transak’s Gandon said.
It’s also likely due to rising Ethereum fees, said John Stefanidis, CEO and co-founder of crypto gaming startup Balthazar DAO. DL News.
“When the price of Ethereum rises, it can lead to increased gas fees, disincentivizing NFT trading,” he said. Data from Eterscan shows that transaction fees on the network have increased by more than 350% since the beginning of the year.
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NFT Malaise
NFTs have struggled to regain momentum after being swept up in a broader crypto market sell-off in 2022, further compounded by waning interest in the sector.
Arguably the most popular NFT collection comes from Bored Ape Yacht Club, whose floor price has gradually decreased since peaking at $600,000 on May 1, 2022.
A floor price refers to the lowest price at which an NFT within a specific collection is currently listed on marketplaces like OpenSea and Blur.
Since March 6 of this year, the value of Bored Ape’s NFTs has fallen by 13%, while DeGods, another popular project, has fallen by 34% over the same period.
“The current NFT narrative is more about utility NFTs that you can use in blockchain games,” said Etienne Gandon, business development analyst at crypto expansion firm Transak. DL News.
That’s because the market is less focused on speculation in large NFT collections, which are more about showing off someone’s social status, he said.
“You need a lot of new entrants to drive prices up,” Gandon said. “We are not at this stage at the moment.”
The outlook for NFTs could improve once the current surge in the broader cryptocurrency market subsides, argues Casassovici.
“Investors, always on the lookout for new avenues of growth, may find NFTs’ depressed rock bottom prices an attractive proposition. This potential pivot could reignite interest in NFTs, presenting an opportunity for recovery and growth,” he said.
Crypto Market Movers
- Bitcoin rose 1.2% in the last 24 hours, trading at US$72,443
- Ethereum followed suit, rising 1% over the same period to a price of $4,044.
What are we reading
Sebastian Sinclair is a market correspondent for DL News. Have a tip? Contact Seb at sebastian@dlnews.com.