How NFTs predicted cryptocurrency recovery, Nansen reports claims
The crypto-research company Nansen published a report shared with NewsBTC, about non-fungible tokens (NFT) and their performance in the midst of the persistent bearish trend in the industry. NFTs have been a popular sector since 2021, when they facilitated the wider use of digital assets, but have taken a toll as Bitcoin and other cryptocurrencies go down.
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According to Nansen, their NFT Blue Chip-10 and NFT 500 indices showed strength last month. At the time, Bitcoin and major cryptocurrencies were on the verge of registering annual lowest values. BTC’s price crashed to a multi-year low of around $ 17,500.
Meanwhile, the Nansen Blue Chip-10 reported an increase of 23.6% as early as June 2022, possibly indicating a decline in sales pressure for the industry. In June, the crypto market saw a capitulation event when large crypto-investment companies became forced sellers when they defaulted on outstanding debt obligations.
NFTs served as an indicator of future activity for the crypto market. As Nansen’s indices developed in the opposite direction throughout June, the positive performance expanded and suggested the formation of a local bottom for Bitcoin and Ethereum.
The report claimed the following about the general sentiment over the crypto market and how NFTs have performed better even in times of turmoil and persistent sales pressure:
Blue Chip NFTs led the trend in June (…). Although the last week of June saw a bear market rally within the broad crypto market, it seems that this trend started earlier in the NFT market. All Non-Fungible Token (NFT) sectors registered a setback in June (measured in ETH), with the exception of gaming NFTs at the end of Q2 2022.
In July, the crypto market saw some relief with the price of Bitcoin trading above its 2017 all-time high, north of $ 20,000. However, BTC’s price has lost steam and seems ready for a new period of sideways movement and consolidation.
What NFTs spell for the crypto market in the short term
Additional data provided by Nansen claims that recovery in this sector may be unsustainable. Despite the positive performance in June, these digital assets record a decline in trading volume, number of transactions and active users, as shown below.
This decline in sector activity corresponds to NFT’s investors reducing risk and adapting to current macroeconomic conditions. Nansen notes:
(…) Within the Ethereum (ETH) DeFi sector, we are witnessing a dramatic reduction in mortgages with a significant investor base that realizes historically significant losses. A “risk off” sentiment is still very clear in the NFT market, and the limited liquidity in the NFT market suggests that this trend may not continue (…).
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However, the sector is recording an increase in first-time buyers and a decline in the buyer-seller ratio. This calculation is used to measure the general sentiment across NFT investors, who appear to be more optimistic than in the general crypto market and, according to Nansen, “highlights the development of NFTs as a sector”.
