Has the NFT Bubble Burst?
Burnt Brigade #2 - The cryptocurrency market has been experiencing bearish conditions but does the same apply to NFTs?
Non-fungible tokens (NFTs) have evolved into a multi-billion dollar asset class but countless speculators claim that the bubble has burst. The height of the world’s tallest skyscraper has historically corresponded with the peak of global financial markets. However, as we immerse ourselves into an increasingly digital and decentralized world, we need to look beyond physical metrics to gain a deeper understanding of market dynamics.
The Burnt Brigade newsletter series will carry out such analysis. We will deeply explore the data surrounding digital assets to get a deeper understanding of NFT market conditions. In this release, we will examine whether the data suggests that the claim of the NFT bubble bursting has any credit. We will also present a brief summary of some major NFT-related news and a summary of some of the major purchases carried out by NFT whales.
Cryptocurrency market reversal led by Bitcoin
While the height of skyscrapers may be linked to conditions in the global financial markets, the entire cryptocurrency industry is undeniably tied to Bitcoin. When Bitcoin is appreciating, the entire industry holds more optimistic outlooks and it has a self-reinforcing effect on everything. From the humble crypto-focused freelancer to the wider altcoin markets, everything benefits when Bitcoin price is on the up!
The converse is true when Bitcoin market conditions turn bearish. The majority of other crypto assets are highly correlated with BTC price and emerging projects struggle to raise funds when the market is depreciating. For Bitcoin, it’s latest peak came in May. The market has since traded in a medium-term downtrend and other crypto assets have naturally been impacted. The below one-month correlation between the top-ten crypto assets highlights that other large-cap cryptocurrencies were extremely affected when market conditions reversed. The one-month correlation between these assets rose as high as 91%.
(Source: Skew.com)
However, NFTs are somewhat distinct. Their properties in the marketplace are dissimilar from their large-cap and fungible counterparts. NFTs can have price floors, higher dependency on the promotion of artists and enterprises tied to issuance, and have a more fragmented marketplace infrastructure. As a result, the asset class naturally does not exhibit the extremely high correlations that are evident between the leading large-cap cryptocurrencies.
What does the data say about NFT market conditions?
Despite dwindling trading volume for Bitcoin, NFT sales logged a record month in June. Over $2.5 billion in NFT sales have been coordinated throughout the year, making NFTs a multi-billion dollar asset class. This is up from roughly $14 million in 2020. In June, $150 million in Ethereum-based sales were carried out on leading marketplace OpenSea.
(Source: Reuters.com)
While the rest of the cryptocurrency market has been suffering steep reversals, NFTs have firmly positioned themselves as a multi-billion dollar asset class. Participants in the both primary and secondary markets have consistently numbered over 10,000 on a weekly basis.
(Source: Reuters.com)
While sales and user figures have remained strong, the infrastructure surrounding the NFT marketplace is expanding and becoming more versatile. NFT minting and trading has continued to diversify away from the Ethereum blockchain with NFT-focused tech solutions arising on chains including Polkadot and Solana. The Burnt Finance protocol will be underpinned by the Solana blockchain as it facilitates low-cost, high-throughput transactions. By building on the Solana blockchain, the costs imposed on minting and auctioning NFT assets are significantly reduced.
Meanwhile, cryptocurrency projects that are heavily focused on NFT technology have been outperforming the market. DApps that have been integrating NFTs have secured strong traction in terms of usage while their native tokens have outperformed the market. Axie Infinity is the shining example in this regard with their AXS token. The AXS has recently exploded in terms of price appreciation and trading volume with the AXS token increasing by roughly 1,150% over the past month.
(Source: Tradingview.com)
Who said NFT bubble?
The cryptocurrency market may be in the doldrums but the NFT market continues to grow from strength to strength. Record sales have been logged on leading marketplace OpenSea in June while over 10,000 users steadily participate in the market on a weekly basis. Platforms that have integrated NFTs into their technology have been outperforming, indicating that the NFT market has more room for growth. NFT bubble… What bubble?
NFT News
OpenSea raises $100 million financing round led by a16z.Leading NFT marketplace OpenSea has raised $100 million in a Series B financing round with participation from a16z, Ashton Kutcher, and many other high profile investors. The significant raise highlights that NFTs continue to break into the mainstream and that major players will continue to build infrastructure to cater to the growing demand. The raise comes roughly one month after marketplace Rarible raised $14.2 million.
Solana leads public conversation. Data from The TIE, presented in the Coinbase Institutional weekly market report, highlights that Solana has been leading public conversation among growing Layer-1 blockchain protocols. Mentions referring to Solana, Polkadot, Algorand, and Polygon are all recording roughly 1,000 Tweets per day while Cosmos lags significantly behind at less than 100 tweets per day.
Stoner Cats NFT series launches. A collection of NFTs that will provide access to a short animated series recently launched. The series will include participation from Mila Kunis, Ashton Kutcher, Vitalik Buterin, and Family Guy’s Seth MacFarlane. Since launching roughly two days ago, the series has attracted over 5,000 in ETH sales.
(Source: pro.nansen.ai)
NFT Whale Watch
Over the past week, NFT whale Pranksy has purchased considerable allocations in both the World of Women and Stoner Cats NFT collections. Pranksy owns 9.67% and 4.8% of the collections respectively. Pranksy has already begun selling some of his World of Women collection.
About Burnt Finance
Burnt Finance is the first fully decentralized auction protocol on Solana. Burnt allows users to take auctions into their own hands, enabling the minting and trading of any asset in an entirely permissionless ecosystem. The platform can support auctions for synthetics, NFTs, digital assets, and much more. Given its unique Solana-based architecture, Burnt is able to achieve unparalleled transaction speeds with negligible fees.