The only thing NFTs have in common with Bitcoin is that people outside the cryptosphere keep wondering whether they’re both dead. “Are NFTs Dead” is a popular headline as of late, but recent market data indicates that the truth is far different. Has bullish Ethereum price action resulted in a renewed interest for non-fungible tokens?
Various dashboards on Dune Analytics show that NFT volume on Ethereum has experienced a tremendous jump. Not only that, but people are also massively migrating to Blur – a new and promising NFT exchange. Both factors imply a renewed interest in NFTs.
The cryptocurrency market is treating us well so far into the year. Meme coins such as DOGE are on the move again, a new AI trend emerged, and Bitcoin seems to reclaim old highs despite a sluggish stock market. Can NFTs join the fiesta too?
NFTs are non-fungible tokens whose main trait is the lack of fungibility. Fungibility means that an asset is interchangeable – the most popular example being money. You can trade a dollar for any other dollar and still retain the same value. But you couldn’t do the same thing by trading real estate, music records, etc.
An NFT is unique. It cannot be compared to any other NFT, not even to an NFT within the same collection. The same can’t be said for a Bitcoin or Ethereum, whose tokens are interchangeable and lack any uniqueness.
In crypto, investors buy NFTs to collect digital art collections. The artwork typically represents online avatars that people can use as profile pictures on various crypto forums. The Bored Ape Yacht Club (BAYC) – a collection of 10,000 pictures of apes – is the most popular NFT collection on Ethereum. One such monkey ‘pfp’ sells for up to $125,000 at current prices.
Trading volume for Ethereum NFTs has dried up as of June 2022, reaching a low of approximately $300 million per week. The time period coincides with the same moment that Ethereum reached fresh lows at $1,000 – marking the start of a lengthy bear market.
NFTs – like all other digital assets – are shackled by the nature of crypto’s very own trickle-down economics. Capital in crypto markets flows from the largest assets down to the smallest assets. The profits from the smallest assets then return to Bitcoin and the cycle begins anew.
Some investors refer to this concept as capital rotation, and it can involve rotation between various market caps, sectors, etc. Capital rotation means that profits from Bitcoin migrate to altcoins, and money made from altcoins migrates to NFTs.
Risk is the sole reasoning behind such a capital flow in crypto. Investors prefer buying the least risky asset (Bitcoin) before allocating more capital to Ethereum, altcoins, and other assets. Buying high-risk assets makes no sense if investors consider low-risk assets risky.
So why is NFT trading volume so low since June? Because it doesn’t make sense to buy a JPEG of a pixelated animal when Bitcoin itself is having trouble staying afloat.
Because there was no money to be made with Bitcoin – due to crypto winter – investors were reluctant to buy NFTs. You can tell that this is true by comparing the Ethereum price chart with the Ethereum NFT volume chart. Now that ETH price is up again, so too are NFT sales.
The current state of the NFT market on Ethereum implies that investors are once again passionate about digital art. Weekly trading volume across all NFT exchanges jumped from the November lows of $90 million to almost $400 million in February.
Most of the volume increase is attributed to Blur – a new NFT marketplace popular for its low fee model. OpenSea volume increased only by $30 million during the same period. Meanwhile, Blur’s weekly trading volume increased from $30 million to $380 million – marking a 1190% jump in volume.
Floor prices on Ethereum have also seen a remarkable increase. For example, the floor price for BAYC increased from 70 ETH to 80 ETH in the last 30 days. That’s an increase of $13,600 per NFT at current ETH prices. Most of the increase took place during the last week – which has also seen a volume uptick of 512%
Other collections aren’t doing bad either. Data from OpenSea shows that collections such as Mutant Ape Yacht Club, Moonbirds, and Azuki had a weekly floor increase of 16.2, 6.6, and 15.18 ETH respectively. Some freshly minted collections are also making strides, indicating that interest in Ethereum NFTs is more than rejuvenated.
Solana – the second biggest NFT ecosystem – also sees renewed interest. Monthly trading volume for NFTs on Solana increased from $75 million to $158 million between December and January. Although the volume is nowhere close to that of Ethereum, it’s remarkable that a blockchain that went through several traumatic events is still keen on speculative JPEGs.
Individual collections have had incredible success in terms of floor prices. DeGods, Solana’s most popular NFT collection, had its floor prices jump from $3,000 to $13,000 since November per data from SolSniper. ABC, a collection minted only 6 months ago, had a similarly beautiful run from $500 to $5,000 during the same period – with the exception of having its floor price halved within weeks.
Whether NFTs are dead or not depends on how crypto fares. The correlation between token prices and floor prices is real. And if NFT collectors want their bull run to continue, they will have to pray for a bountiful harvest in Ethereum-land. Otherwise, there’ll be no extra money left for the NFT market.
The crypto market is generally strong as of February. Both Bitcoin and Ethereum show strength in spite of shaky macroeconomic factors.
In fact, Bitcoin bulls have somehow shown more resolve than S&P 500 investors over the past few weeks. This has likely happened due to new narratives being born – such as AI crypto tokens, Chinese real estate moguls moving capital into crypto, and others.
Data from OpenSea, Magic Eden, and Blur show that investors collect art once again. But is their fervor here to stay? The answer lies in Bitcoin, Ethereum, and Solana – or more specifically, their performance during the next few months.
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