How about NFT, when the cryptocurrency market was hit hard on “5.19”?
Welcome back to the last week of May🔥🔥🔥
Recently, the collapse of cryptocurrency prices eroded the value of U.S. dollar-based NFTs, and at the same time increased their buying and selling costs, which may have constituted a setback to the rapidly developing digital asset market.
NFT (Non-fungible Tokens) trades digital assets by recording the state of their ownership on the blockchain, in February and March of this year 2021, the popularity of NFT skyrocketed, with sales reaching hundreds of millions of dollars, partly due to the soaring cryptocurrency prices in 2020.
Currently, most NFT buyers pay through Ethereum or U.S. dollars. However, the cryptocurrency market suffered heavy losses in the last few weeks, with the total market value plummeting by US$1 trillion, of which the prices of Bitcoin and Ethereum both fell by 30% to 40%.
The price of NFT is usually denominated in Ethereum in the market. The decline in the price of Ethereum means that sellers may increase the price of NFT in order to maintain its value in USD.
NFT value may be underestimated
A collector with the pseudonym “Pranksy” stated that the value of his cryptocurrency portfolio shrank by more than $10 million last week. But he said that he doesn’t think the value of the more than 100,000 NFTs in his collection has also decreased because he has not sold them.
Pranksy said, “I don’t think those who have invested a lot of money in NFTs can sell them at a 50% discount tomorrow, at least most people won’t. It’s like the traditional art market runs counter to Wall Street’s trends. , I believe that many people regard certain NFTs as a store of value.”
NFT enthusiasts believe that the value held by the art works, virtual land, game equipment or other digital assets represented by the NFT is completely different from the cryptocurrency used to purchase them.
Andrew Steinwold is a cryptocurrency investor from Chicago, and he also runs an NFT fund. In his view, “because all NFTs are priced in Ethereum, there is no doubt that their value will be underestimated.”
Gas fee skyrocketed into a problem
As the price of cryptocurrency falls, the NFT market will inevitably be impacted by gas fees, which are fees paid to crypto miners who perform transactions on the blockchain.
Last week, due to the surge in demand for users to buy and sell Ethereum, gas fees also rose and broke new highs. It was quickly confirmed that gas fees were once as high as 2000 GWei. OpenSea’s daily trading volume also fell from US$2 million on Tuesday to US$1.1 million recently.
Hamish Barnes, Head of OpenSea Growth and Community, said, “This is because the gas fee is too high, making it difficult to sell low-priced goods.” On the Ethereum blockchain, sending low-value NFTs is almost meaningless because the gas fee itself has exceeded The value of this NFT.
According to data from NonFungible.com, a website that tracks NFT market activities, last Wednesday, NFT sales on the Ethereum blockchain were US$19,687,241, up from US$15,637,693 the day before. However, sales have declined. Compared with 4113 on Tuesday, only 2462 were sold on Wednesday. Obviously, part of the cost is in the form of gas fees.
However, Gauthier Zuppinger, the co-founder of NonFungible.com, said that the NFT market is becoming less and less relevant to the crypto market.
Zuppinger said, “I don’t think the turbulence of the crypto market in the short term will have a direct impact on the NFT field.” He added, “Some wealthy cryptocurrency investors may even think that the risk of NFT is lower than that of cryptocurrency because the former has Use cases as support.”
NFT trading volume grows during a period of falling cryptocurrency prices
In fact, during the crypto market crash this month, even when the token price dropped by 30% to 50%, the average number of NFTs purchased and sold by users reached 85,787, with a total daily value of $58 million, compared to January An increase of 277%.
In January, there were an average of 21,815 NFT transactions per day on Ethereum, Flow and Wax, and so far in May, the average number of transactions has increased to 82,373. During the collapse of the crypto market, this number was even higher, with an average of 93,809 NFT exchange wallets per day. This shows that the NFT market is resilient to falling prices of cryptocurrencies.
From May 12 to May 23, the prices of almost all cryptocurrencies in the market were in a strong downward trend. But during this period, decentralized applications on the blockchain have strong practicality. Even if a centralized institution like Coinbase cannot handle network congestion and consumer panic, the business of NFT markets and exchanges such as Uniswap will continue to operate as usual.
NFT’s market activities never stop
Atomic Market, the NFT trading platform, is a good example. Although the price of its platform token WAXP continues to fall, transactions on the platform continue. In addition, platforms on the Ethereum blockchain, such as OpenSea and Rarible, have been affected by the increase in gas fees, and the transaction volume has experienced a short-term decline. When the gas fee returned to normal, the trading activity on the platform increased again because collectors were looking for discounted NFTs.
In addition, companies that “allied” with the NFT project, such as MANA, AXS, and WAX, have all suffered quite a bit during the recent crypto market collapse. However, taking a step back, the price of these tokens has increased by 300% to 800% since January this year.
Of course, the fall in cryptocurrency prices this month has also had a certain impact on NFT trading volume. Since the price of cryptocurrencies began to collapse on May 12, the average trading volume of NFTs has been approximately US$5.8 million per day. In the first 11 days of this month, the average daily NFT transaction volume was $14.9 million. Although NFT trading volume fell by 61%, trading activity was not affected. Collectors, traders, gamers, and artists have been trading and buying and selling NFTs, as if the collapse of cryptocurrency prices had never happened.
The price plunge of cryptocurrencies this month is very different from the plunge in early 2018. The biggest difference is practicality.
The number of products on the market that require the use of encrypted tokens far exceeds that of three years ago. Take transactions and lending in the DeFi field as an example. Of course, there are many NFT projects, virtual worlds, and blockchain-driven video games. These tokens and values are locked in the liquidity pool and NFT. There are also projects that incorporate financial services elements into the gaming experience, such as Aavegotchi and Alien Worlds.
Of course, trading is not the only way to measure the success of the token economy. With the continuous development of blockchain solutions, more products will bring practicality to the market. One might think that practicality makes cryptocurrencies more resilient to market fluctuations. This does not mean that there will be no price fluctuations in the future, but even if the value changes, market activities will continue.
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Article ref: Bitcoin plummeted, why did NFT trading volume increase instead of decreasing?
