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NFTs Down Bad

Plus: Long-term investors double down

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This week we dive into the contrast between current network activity and long-term investors’ vision. We evaluate the current status of the NFT market, broader on-chain levels and the accumulating patterns among hodlers.

Weekly Fees — Sum of total fees spent to use a particular blockchain in a week. This tracks the willingness to spend and demand to use Bitcoin or Ether.

  • Bitcoin fees dropped by a third as crypto activity slowed down
  • Ethereum’s weekly fees reached a yearly low

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges over the past seven days. Crypto going into exchanges may signal selling pressure, while withdrawals potentially point to accumulation.

  • Both Bitcoin and Ethereum saw nine-figures worth of inflows into centralized exchanges

NFTs Down Bad

As risk-off sentiment becomes engrained in markets, the furthest assets on the risk spectrum are getting crushed. Although NFTs had managed to appreciate in the first quarter of 2021 in contrast to other assets, they have underperformed substantially over the past month.

Via IntoTheBlock’s BAYC analytics

$240k Down — Bored Ape Yacht Club (BAYC) NFTs have crashed severely in May

  • Buying a BAYC NFT at floor price four weeks ago would have resulted in a loss of nearly a quarter of a million dollars
  • This coincides with a drop in Ether’s price, which is the main currency in which NFTs are traded
  • However, ETH is down “only” 30% in May, while most NFT collections have lost over half of their value

Along with the crash in NFT prices, trading volume has plummeted.

Via IntoTheBlock’s NFT Insights

Back to Earth — After increasing parabolically in January and February of 2022, NFT volumes have plateaued

  • Over $16 billion in NFTs was traded in January, compared to under $4 billion so far in May
  • Coinbase’s NFT marketplace has thus far disappointed, trading under a million dollars worth of NFTs and less than 2,000 users as per TechCrunch

Coinbase is not alone on this, with NFT interest dwindling throughout the world.

Via Google Trends

Searches for NFTs Fade — Google searches for “NFT” have dropped by over 75%

  • In line with trading volumes, Google Search Trends peaked in January and have been on a down-trend since

This is not the first time that NFTs appear “dead” and it will likely not be the last. While there certainly was very high speculation in the NFT space, there are also some innovations behind it that we are just beginning to explore.

Long-Term Players Double Down

Activity on Ethereum and most smart contract platforms have suffered from the decreasing interest in NFTs. As large NFT sales have become less common and there is lower demand for blockchains, the amount of volume traded on Ethereum has been decreasing.

Via IntoTheBlock’s Ethereum network indicators

80% Down — Ethereum’s transaction volume is one fifth of what it was a year ago

  • Decreasing NFT interest along with lower yields in DeFi have led to volumes dropping significantly
  • Other key metrics like fees and daily active addresses follow the same path

This pattern is in sync with the last bear market, where on-chain activity decreased across the board. However, this has not stopped long-term believers to continue accumulating.

Via IntoTheBlock’s Ethereum network indicators

50% of ETH Belongs to Hodlers — Addresses that have been holding ETH for over 1 year (“hodlers”) have managed to acquire over half of all Ether in circulation

  • Hodlers’ balances have moved inverse to price action
  • Hodlers had been decreasing their balances since September 2021, but began accumulating in January 2022
  • Since then, hodlers’ balance has grown following each large crash, reaching over 50% of all circulating supply for the first time since 2020

Despite of the near-term picture looking grim, long-term players continue to double down. On a similar note, a16z announced their $4.5 billion crypto fund, the largest ever in crypto’s history. These investments typically target time horizons in decades, not weeks. Ultimately, it will take time for crypto’s vision to come into fruition and regardless of the short-term uncertainty, long-term market participants maintain their conviction.

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