Meta is leaving the NFT scene despite market activity flashing mild recovery signs

Social media giant Meta on Monday pulled the plug on its digital collectibles initiative backed by Facebook and Instagram, barely a dozen months since it pledged its commitment. The decision to move away from this space comes against a recent trend of increased participation from individual collectors and creators as well as institutions invested in the sector. The non-fungible tokens (NFTs) niche appeared to be suffering a positive bounce earlier this year, reflected in increased sales and transaction volumes between January and February.

Meta is running NFT initiatives on its social platforms

In a March 13 tweet, Meta’s head of trading and FinTech, Stephane Kasriel, shared news that the company has cut support for efforts centered around NFTs in favor of exploring other Web3 business ideas. The tech firm first began testing the integration feature on Instagram by allowing US-based creators to share their NFTs on the social media platform before expanding the product to Facebook in June. Instagram users in other countries also gained access to the NFT tool after it was made available externally in July. Through its Polygon-backed NFT marketplace, Meta also allowed users to create NFTs on Polygon and sell them directly on the social platforms in November.

Meta’s determination to retreat from this niche seems a concession to a shaky market as Bitcoin and other crypto tokens show price volatility after a battle that resulted in dull performance in 2022. The depressed market was caused by a cocktail of bearish developments, including ripple effects of the collapses of the Terra ecosystem in May and the FTX exchange later in November. The unfolding demise of crypto-focused banks this month has exacerbated the situation, introducing more uncertainty and fear for the future of the industry.

Ditching NFTs integration is probably another measure by the technology giant to cut costs while meeting innovation goals. So far, several of the firm’s crypto-related projects have been shelved, including its digital wallet offering, Novi, whose pilot program it shut down last July. Last week, the Wall Street Journal reported that Meta plans to lay off more employees and may announce more rounds of job cuts in the coming months. More products and services are expected to be victims, according to the March 10 WSJ report. The Washington Post confirmed the same, reporting that the multi-phase layoff in March would affect the recruiting division. Other technical and non-technical roles will then be targeted in the coming months.

To learn more about Polygon, check out our Investing in Polygon guide.

NFT Market Overview

Contrary to an exodus, several non-native brands have shown interest in foraying into the space, which has also evolved to welcome competition between marketplaces. The dominance of OpenSea has been challenged by the Blur NFT marketplace, which launched in October 2022 but has flourished in recent weeks. In addition to these narratives, the hype of the newly introduced Ordinals on Bitcoin has contributed to a slight uptick in NFT activity.

Yuga Labs marks auction of Ordinals-inspired NFT collection as a success

Last month, Yuga Labs took on the Ordinals craze on the Bitcoin blockchain, launching a new Twelvefold collection. Yuga made the reveal via a teaser on Twitter, saying the controversial offering would have 300 pieces, much more limited than other NFT drops it has done in the past. The creator of Bored Ape Yacht Club (BAYC) explained that the “base 12 art system located around a 12×12 grid” collection was created in-house by Yuga Labs’ art team using various advanced techniques such as 3D modeling, algorithmic construction and advanced rendering tools . Aside from the dozen items set aside by Yuga Labs, the rest of the pieces sold in less than 24 hours, bringing in $16.5 million.

Blur’s rise gives OpenSea a run for its money

With a strategy focused on traders and liquidity, the nascent resurgence of NFT marketplace Blur has scaled its dominance and squeezed market share from leading platform OpenSea.

NFT volume (90-day) distribution chart. Source: Dune Analytics

Blur has continued to outperform OpenSea despite the latter’s numbers over the past two weeks suggesting it is gradually recovering. Dune Analytics data shows that the Blur marketplace accounts for the majority (61.1%) of NFT volume distribution, followed by OpenSea, which accounts for just over a quarter. Blur has also consistently recorded a higher average number of trades per user than any other top marketplace since mid-February. OpenSea still dominates in user and sales distributions in the same period.

NFT volume distribution chart

Following the launch of the BLUR token, Glass node observed in an issue of the chain’s Weekly On newsletter that Blur had gained almost 35% in market share while OpenSeas has fallen in almost the same measure. Blur’s unique strategy based on professional traders has borne the success. The market data and analytics firms noted that this higher rate of sales on Blur’s platform creates a positive feedback loop where more NFT sellers feel confident listing their items, leading to a more extensive offering, which in turn attracts more buyers.

Token Terminal data further shows that trading activity on OpenSea has fallen since mid-February. The platform’s daily and weekly NFT trading volume numbers have tracked a consistent decline. The 7-day trading volume for OpenSea was writing $90 million compared to Blur’s $314.8 million.

Top projects on NFT marketplaces

While a larger NFT sale size does not necessarily guarantee better profitability for sellers, it can be attributed to generally more expensive offerings. A closer examination of the sale sizes on both marketplaces reveals that Blur’s strategy creates a more lucrative environment, with sales ranging from 0.3 to 1.3 ETH. In comparison, sales on OpenSea have consistently averaged around 0.2 ETH for several months.

OpenSea addresses a legitimate vulnerability raised by the cybersecurity firm

OpenSea earlier this week fixed a loophole in the platform that could have been exploited by malicious actors to de-anonymize OpenSea users and obtain their identities. Cybersecurity solutions provider Imperva discovered the “cross-site search vulnerability” on March 9, noting that the root cause was “misconfiguration of the iFrame resizer library” used by the market. OpenSea’s team attempted to release an update to the same, which is implemented by restricting cross-origin communication. Despite its popularity, OpenSea’s safety has been addressed several times. The marketplace was exploited in February 2022, resulting in $1.7 million worth of NFTs being stolen from users’ wallets. OpenSea’s Discord channel was also hit by another vulnerability barely three months later.

Blockchain performance

Ethereum and Solana have maintained their respective first and second rankings in NFT sales volumes per blockchain (over the last 30 days) despite tracking a decline in NFT sales and number of transactions. As for Ethereum, the dominant chain by this metric, NFT sales have fallen roughly 11% over the past 30 days to $734 million at the time of writing. Solana has recorded a 38% drop in the same period and is second with $75 million, according to CryptoSlam data.

Polygon NFT Sales Chart. Source: Crypto Slam

In contrast, Polygon NFT sales increased 52% to $35 million, and NFT transactions increased 37% during this period. The number of buyers has more than doubled to 105,000 – bested only by buyers of Ethereum NFTs. Overall, the NFT niche appeals as an interesting watch for enthusiasts heading into the second half of the month.

To learn more about Ethereum or Solana, visit our Investing in Solana and Investing in Ethereum guides.