NFT Market Crash: Initial Insights and Details
The NFT market crash and the swift shift from a rising trend to a declining one in 2023 are becoming starkly apparent: the NFT realm is grappling with a profound crisis.
Did the NFT market crash?
In early 2023, the NFT market was clearly booming. Sales of tokens in the first quarter jumped 43% compared to the previous timeframe, a stark contrast to the bearish tendencies that had prevailed the year before.
However, this burst of activity didn’t last. Given its preceding ascent, the subsequent decline felt like a genuine NFT market crash.
DappRadar reports that the monthly trading volumes of NFTs decreased by 81% from January 2022 through July 2023. Based on insights from NFT Price Floor, floor prices for notable NFTs such as the Bored Ape Yacht Club and CryptoPunks have now hit levels unseen in over two years. In essence, we're witnessing an NFT price crash.
According to Dune Analytics, sales volume in ETH on Blur, a leading NFT marketplace, nosedived by 96% from its peak at the end of June to early August.
The NFT Crash: The Underlying Reasons
A myriad of factors contributed to this downturn. OpenSea, the foremost NFT marketplace, recently made royalty payments for secondary sales optional, leading to unrest among digital artists. Additionally, regulatory pressure has been ramping up. The U.S. Securities and Exchange Commission (SEC) took its first steps against NFT activities, suggesting that certain tokens might be considered unregistered securities.
Lawsuits from collectors against NFT creators and sellers further strained the NFT price crash. Moreover, numerous traders have shifted their focus back to cryptocurrencies like Bitcoin, which saw a 60% price increase this year.
Even the prominent Yuga Labs, known for its association with Bored Ape Yacht Club and CryptoPunks, hasn't been spared. The change in OpenSea's policy has hit their revenues, prompting them to withdraw support for OpenSea. The situation is exacerbated by the declining value of their proprietary Blur token, which plummeted 32% over the summer's final month.
When you look at the charts, everything is down. You are seeing just a lot of capitulation, ‘We don’t know what to do or where to go,
remarks Lorenzo Melendez, the president at NFT project Pudgy Penguins.
However, not everything is bleak. Works by acclaimed artists like Grails and Mad Dog Jones continue to hold value. Notably, an NFT piece from Grails was auctioned for $6.2 million at Sotheby's in June. Christie's also reports a sustained demand for the Canadian artist Mad Dog Jones' pieces.
Budget-friendly NFTs, particularly those used in gaming, still garner interest. These developments hint at a possible transformation in the NFT market, marked by changing investor sentiments and a growing focus on particular types of non-fungible tokens.
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