NFT prices diverge sharply as Ethereum’s “Merge” craze intensifies
The prices of Ether and non-fungible tokens that often run on the Ethereum network have diverged sharply as investors snap up the second-largest cryptocurrency ahead of the blockchain’s long-awaited software upgrade.
Ether has risen 54% between June 13 and August 15, according to data compiled by Bloomberg. NFTs have fallen an average of nearly 19% over the same period, according to researcher NonFungible. Cryptocurrencies hit a low in mid-June, with Ether falling below $1,000 on June 18, following the collapse of the Terra blockchain and as the ripple effects began to topple hedge fund Three Arrows Capital and lender Celsius Network.
“The usual path was, if Eth went up or down, if Eth went sideways, then NFTs had room to move,” said Sasha Fleyshman, portfolio manager at investment firm Arca. “Now it underperforms in all circumstances – up, down, sideways.”
Since the most valuable NFTs, such as artwork of chained monkeys and punky-looking characters, are sold for Ether, both tend to move in lockstep. In the past, NFTs have often not fallen as sharply as Ether and have at times appreciated more than the token, Fleyshman said.
That has changed as investors have piled into Ether with hopes that it will continue to appreciate before the software upgrade known as Merge. The upgrade is expected to take place in September after being kicked down the road for several years. Ether holders are also eager to get any additional coins that may arise from offshoots from the Ethereum main chain around the merger.
But there is no incentive to acquire NFTs.
Instead, interest in NFTs has continued to wane and trading volumes have fallen sharply in recent months, according to tracker DappRadar. The world’s largest NFT marketplace, OpenSea, is seeing its lowest monthly sales in a year, according to Dune Analytics.
Many blue-chip NFTs haven’t fared much better either. Bored Ape Yacht Club’s floor price, the lowest price for an item in the collection, has risen by less than 15% in the past month, according to tracker NFT Price Floor. Another popular NFT, CryptoPunks, saw its floor price increase by 13%, according to the website.
Whether the prices of existing NFTs will ever recover is unclear, Arcas Fleyshman said. The next wave of NFTs whose prices rise could be linked to club memberships, or access to gyms or golf courses, he said.
“I would call this last cycle speculative,” Fleyshman said. “My hope is that the next cycle will be value-driven.”
Olga Kharif reports for Bloomberg News.
Copyright 2022 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
