How low can NFTs go?
Image: iLixe48/Envato Elements
The non-fungible token (NFT) market is finally responding to the US Securities and Exchange Commission’s (SEC) intensified crackdown on the cryptocurrency industry. News of the commission’s attempt to freeze the assets of Binance’s US, and the halting of US dollar withdrawals, has caused traders to liquidate NFTs or sit on the sidelines.
Regardless, it’s pretty clear that we’re entering a new phase of the NFT market, and traders are cautious. How low we can go, no one knows.
When FTX collapsed, the Forkast 500 NFT index reflected a 33% loss in value. Today’s market, while showing signs of capitulation, is slowly bleeding out and down nearly 10% over the past seven days. The discard 500 NFT index hit a record low yesterday, bottoming out at 2962.
Navigating this market leads me to more questions than answers, and they come to me endlessly throughout the day. I wonder if we have found a floor for NFTs and if today’s active traders are closer to collectors than they are speculators. Can they hold the line for the next wave of innovation that is set to arrive as blockchain-backed gaming? Will there be more FD&D provided by the SEC, and does the US even have that much of an impact on the markets anymore as developers are driven overseas? Stay tuned for more insight into these questions.
Notable events
There is no shortage of major developments across the NFT landscape. Bitcoin ordinals are getting a major upgrade with Inscriptions 2.0. With this latest Bitcoin Ordinals update, inscriptions can now refer to another inscription which essentially removed the 4MB size limit.
So what can be preserved on the chain now? Video games, generative art, applications and new tokens not even dreamed of yet.
We’ll see what happens when builders get to grips with the new technology, but this progress shows that we’ve only just scratched the surface of what the Bitcoin ecosystem will one day look like.
The market is reacting to a new environment of intense SEC scrutiny. On Saturday, a Twitter account was called NFT statistics pointed out that over 93% of all ETH volume on Blur was sellers accepting bids. This means that there were very few sales, and instead there was probably point farming, or acceptance of offers below the floor price in an attempt to gain liquidity.
The Polygon blockchain is unveiling an upgrade to its ecosystem called Polygon 2.0. Details will be revealed in the coming weeks, but there is exciting talk of some drastic changes, including new tooling for the network’s native cryptocurrency Matic, changes to governance and even the protocol’s architecture. Polygon 2.0 aims to build a value layer through infinite scalability and unified liquidity.
1/ Our vision for Polygon is simple: to build the value layer for the Internet.
The Internet allows everyone to create and exchange information. The value layer allows everyone to create, exchange and program values.
Enter Polygon 2.0: a blueprint for building the ultimate value layer. pic.twitter.com/9eYSr3H1L5
— Polygon (Labs) (@0xPolygonLabs) 12 June 2023
Art can be immune to tough market conditions. In the last issue of On Deck, we mentioned a few big art sales of both Fidenzas by Tyler Hobbs and XCOPY. We have more of both coming in after a $370,000 sale of Fidenza #158 on Sunday, and another XCOPY 1/1 called Five Eyes, which is now on auction at 97 ETH.
Look at the lists
With Bored Ape Yacht Club and profile picture projects on Ethereum cooling off, Bitcoins Ordinals and other projects on other chains have their chance to shine. Ordinals have taken the top spot for the past seven days with strong demand and excitement around Inscriptions 2.0. Gamers come to play, so DMarket’s CS:GO and other game skins are hardly influenced by the rest of the market. Sorare and their fantasy sports NFTs are usually in the top 10, but it’s in this new market that they might get some new eyes.
We will look at their ranking and see if the low-cost, high-volume NFTs can gain more traction like DMarket. Art Blocks is looking strong again on the back of major art sales, with more expected to keep rolling in. Art is hot.
Real NFT sales are cooling, but wash trades are still increasing. Ethereum is down, as most would expect, but the wash trade continues to rise. Will the end of Blur season 2 cool the laundry trade, or will they continue if season 3 is announced?
Bitcoin has also seen its wash trades increase this week, but so did real sales. Bitcoin has increased by almost 45% in the last seven days. Solana, Mythos Chain, and Polygon are all tightly clustered at three to six, but Polygon had quite a few wash trades this past week in some atypical collections. Last week’s report on some new Polygon projects hitting the top 10 compilations by sales volume (Weee Did It Palz, The Zumba Warriors, The Flower Powerz and The Fladers) turned out to be mostly washes. Each collection now reflects these numbers, as does the blockchain ranking.
