The Evolution of NFT: How the Bear Market is Shaping the Development
The current crypto winter, fuelled by a worldwide bear market in every financial sector, has taken its toll on the NFT market. Data shows that trading volume for NFTs is down 97% from the beginning of the year. Trading volume peaked in January at around $17 billion, with that figure now hovering around the $500 million mark.
Daily unique wallets in the NFT market have also dropped, as has Google search trends. Much of this isn’t surprising, and the global financial bear market weighs heavily on every sector, especially speculative markets like crypto, even more so with NFT which is both a speculative crypto play and often misunderstood technology. But what can current market trends tell us about the NFT market, where it’s at, and where it’s going?
Even the blue chips aren’t safe
The crypto boom of 2021 brought NFT into cultural relevance. This virality and excitement saturated the market with endless new NFT collections, some of value, but also an increase in rug-pulls.
But this current bear market has shown no one is safe. Top leading NFT collections have seen substantial declines in trading volumes and price. Bored Ape is still the leading seller among NFT, but its trading volume is down 43%. Additional declines include CryptoPunks whose trading volume has seen a 21.24% decrease.
Yet, as previously mentioned, this isn’t completely crypto specific. Current global markets are all being stressed as the FED aggressively raises USD interest rates in an attempt to curb inflation. The increase in the US Dollar index, along with decreases in the price of Ethereum has meant NFT have been doubly impacted. The Ethereum top 100 NFT market cap value has decreased by 27%, but relative to the USD, has declined 44%.
Even though the market continues to decline, some might wonder if this is a signal of broader global market trends in every sector. NFT adoption continues to increase, with the third quarter of 2022 seeing a 36% increase in unique traders when compared to the previous year. Interest is there, and the market is continually becoming more diversified, which will only help to stabilize the market as more people choose to invest in NFT for the first time.
Recently, CryptoPunk #2924 sold for 3,300 ETH ($4.4 million). That is the 4th most expensive CryptoPunk ever sold, even as the broad crypto market has stagnated for months.
GameFi breathes fresh air into the market
NFT continue to be used in new ways and various NFT market sectors continue to thrive. While investment into the overall NFT market has declined, the use of NFT in gaming is seeing increased interest. The number of ‘Unique Active Wallets’ in August showed healthy growth, with 847,000 wallets. Solana in particular continues to see a continual rise in unique wallets with a 21% growth on the monthly metrics.
Bull markets bring growth through sector investment, but they also bring bad faith projects. The one advantage of a bear market is that decreased sector investment means that only the best projects and assets can survive, flushing out a bloated market.
NFT have multiple case uses, meaning that investors need to further invest in studying market dynamics and the evolution of the bear market to see where value lies.
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