The NFT market seems to have lost momentum over the past few months, as shown by data on trading volumes on the Ethereum blockchain, the most widely used platform for creating and selling NFTs. According to The Block Data, which aggregates NFT transactions on Ethereum, the total trading volume of NFT on this blockchain amounts to more than 400 million dollarsnearly half of them in the last 30 days. This figure is significantly lower than the peak reached in January 2022when the monthly trading volume of NFT on Ethereum had exceeded $4.8 billion.
Ethereum NFT Market Decline: Declining Trading Volumes and Explanatory Factors
The number of weekly buyers and sellers of NFT on Ethereum has decreased considerablypassing respectively from over 100,000 and 30,000 in March to around 20,000 and 10,000 in June. The average number of daily transactions of NFT on Ethereum has also increased from more than 100,000 in March to less than 40,000 in June.
Several factors can explain this decline of the NFT market. First of all, it is possible that the initial enthusiasm for NFTs has run out of steamfaced with an offer too abundant and too variable in quality. Many NFT projects and platforms have emerged in recent months, but all failed to distinguish themselves or to retain their audience. Some NFTs have been accused of being overvalued, plagiarized or even fraudulent…
Then, we must take into account the general context of the cryptocurrency market, which has seen a sharp correction since April. The total market value has gone from more than $2 trillion to less than $1.5 trillionleading to lower price and investor sentiment.
Finally, it should be mentioned the high costs and low efficiency of the Ethereum network, which constitute a brake on the development of the NFT market. Indeed, each transaction on Ethereum requires of course the payment of a commission called gas, which varies according to the level of activity of the network. Gold, these fees have reached prohibitive levels over the past few months, making it too expensive for most users to buy or sell NFTs. For example, the average cost of an Ethereum transaction was around $40 in Maywhich represents a significant portion of the price of an average NFT.
NFT Market Outlook: Signs of Rebound Despite Challenges on Ethereum and Promising Alternatives
Despite this rather bleak picture, there are also positive signs which point to a possible rebound in the NFT market. First of all, it should be noted that the monthly trading volume of NFT on Ethereum increased slightly in June compared to May, which could indicate renewed interest after a slack period. Additionally, some NFT platforms and collections continue to perform well, such as OpenSea, the largest NFT marketplace, which reached a sizable volume of $166 million in June.
Next, it should be noted that the NFT market is not limited to Ethereum, and that other blockchains offer interesting alternatives for NFT creators and buyers. One example is the Flow blockchain, which hosts the NBA Top Shot project, which allows basketball fans to collect and trade highlights of the game in the form of NFTs. Other blockchains like Binance Smart Chain, Tezos or Polygon also offer faster, cheaper and greener solutions than Ethereum to create and sell NFTs.
It must be remembered that the NFT market is still young and evolvingand that it contains a huge potential for innovation and creativity. NFTs are not limited to art or collectibles, but can apply to many fields such as music, video games, social media, education or health. However, one segment that could breathe new life into NFTs is video games. We discussed this phenomenon with Mr Rabbit at the beginning of the month.
Source: The Block, Cryptoast, Cryptonews, NBA Top Shot