Navigate the volatile NFT market

Last month, the NFT market saw a spike in trading volume on April 5, followed by a significant 50% drop by the end of the month. The number of NFT sellers exceeds the number of buyers, which indicates a potential oversupply in the market.

As these markets develop and grow, investors and traders need to stay abreast of the latest developments and trends. By examining the key factors driving the cryptocurrency and NFT markets, we can better understand the opportunities and risks associated with these new trends.

Data from this report was taken from Footprint’s NFT research site. A user-friendly dashboard containing the most important statistics and metrics to understand the NFT industry, updated in real time. You can find all the latest deals, projects, financing and more by clicking here.

The main findings

Crypto macro overview

• The cryptocurrency market experienced ups and downs in April, with Bitcoin rising to $30,506 and Ethereum breaking through $2,100 on positive economic data.
• Despite some volatility, the cryptocurrency market stabilized towards the end of April, with Bitcoin pushing back towards $30,000 and positive sentiment prevailing.

NFT Market Overview

• The NFT market saw an increase in trading volume on April 5, but experienced a significant 50% drop by the end of the month.
• The number of NFT sellers exceeds the number of buyers, which indicates a potential oversupply in the market.

Chains and marketplaces for NFTs

• Ethereum dominates the NFT market volume, but network congestion and fees may drive users to alternatives such as Polygon.
• Blur and OpenSea cater to high-end and retail traders, but both enter each other’s territory and can be integrated.

NFT Investment and financing

• Despite a small increase in the number of NFT projects, the decrease in funding indicates investors’ caution in investing.
• Platform building and scalability solutions are critical for NFTs, as demonstrated by Flow’s $3 million seed funding of the NFT marketplace.

Hot topics of the month

• Integrating AI and NFT technology emphasizes the importance of NFT origin for copyright protection and the value of human creativity in artistic expression to find a balance for sustainable development.

Crypto macro overview

In April, the cryptocurrency market experienced some ups and downs. On April 14th, most cryptocurrencies traded higher due to better-than-expected US economic data, with Bitcoin rising to $30,506, while ETH broke through $2,100 on April 16th.

On the macro front, official inflation rose to 5% in March, slightly below consensus of 5.1%. However, investor focus has shifted to potential recession risks after the banking crisis revealed the fragility of the market’s financial system. Recent data also points to a macroeconomic slowdown, as the ISM Purchasing Managers’ Index fell to its lowest since May 2020.

Despite the volatility, bitcoin shot back to 30,000 in late April, with positive sentiment across the crypto market.

NFT Market Overview

The NFT market attracted a lot of attention in early 2021 when a number of projects launched their own NFT collections. However, the NFT market has shown signs of weakness this year.

In accordance Footprint Analytics, the NFT market peaked in trading numbers on April 5, but daily trades had fallen by 50% by the end of the month. This slowdown in trading activity suggests a growing sense of caution among investors as the initial enthusiasm for the NFT market appears to be waning.

Additionally, according to Footprint Analytics, the number of NFT sellers in the market continues to exceed the number of buyers, suggesting that there may be insufficient underlying demand.

The initial hype surrounding the NFT market was fueled by the cryptocurrency market and celebrity endorsements, which led to a rush of people entering the market. However, the number of people who understand NFTs is relatively small, leading to oversupply. It remains to be seen whether the fundamentals of NFTs can ultimately support market growth and open up new opportunities.

Chains and marketplaces for NFTs

In accordance Footprint Analytics, Ethereum has the lion’s share of NFT transaction volume, with a massive 96% market share. However, in terms of active users, Ethereum only accounts for 44%, while Polygon’s active user base is close behind at 37%.

While Ethereum remains the platform of choice for most mainstream NFT projects, network congestion and high transaction fees may drive some users to alternative platforms. As a result, Ethereum may face challenges in maintaining its dominant position in the NFT market.

Polygon’s daily trades is catching up with Ethereum, with the transaction volume not being high. Nevertheless, the number of trades is comparable, indicating that it is more suitable for small traders due to lower entry barriers. Polygon’s low barriers to entry make it more suitable for small transactions and asset exchanges, meaning the market can be more decentralized and multi-domain. However, it is also more difficult to collect high-value, high-quality NFT projects and assets. Therefore, it takes longer to build a good ecosystem and accumulate value.

From one marketplace perspective, Blur still has an absolute advantage in terms of transaction volume. But when it comes to the number of transactions, OpenSea still has the upper hand. Blur’s dominant position suggests that it is more suitable for high-value assets and professional users with larger transaction sizes. On the other hand, OpenSea’s transactions are looser and more dispersed, with smaller transaction sizes, making it more suitable for retail users and small daily transactions.

Blur and OpenSea represent high-end and small traders respectively. But with the general development of the market, both are encroaching on each other’s territory, and the competition is becoming increasingly intense. The future trend may be further integration of high-end and small markets, creating a certain synergy effect. Continued monitoring of the performance of both platforms will be necessary to predict their future development.

NFT Investment and financing

While the number of NFT funding projects increased slightly from 8 to 11 compared to last month, the funding amount has decreased, indicating a more cautious approach by investors.

Many developers work on the NFT market. Flow, which secured $3 million in seed funding to build a rollup-centric NFT ecosystem, highlights the growing need for layer 2 and scalability solutions to solve Ethereum network problems. The entry of large companies such as Amazon into the NFT market is also expected to increase the market’s visibility and size, but also increase industry risk.

In addition, the music and entertainment industry is exploring NFT, as evidenced by Muverse and Daniel Allan Entertainment, which received funding this month, opening up new opportunities for NFT applications.

Hot topics of the month

As Chatgpt became popular, people started talking about the integration of AI and NFT, as NFT is a good example of a creative economy in the crypto world.

COL 6529 provided a representative discussion of this topic. On the one hand, as the amount of AI-generated content increases, the importance of NFT provenance technology is further highlighted. NFT provenance can help distinguish the source and ownership of content and protect the copyright of content creators.

Conversely, the proliferation of AI-generated content makes original human content more valuable. The uniqueness of human creation is difficult to completely replace with AI, making original works more scarce and valuable. Therefore, the ability of creators to build their reputation is particularly important in an age of digital content overload. Only by allowing more people to understand and recognize their work can creators stand out in the fierce competition for content.

Commercial content creation is more easily replaced by AI, while artistic creation is difficult to replace. Commercial content is usually completed around a certain demand and can be efficiently generated by AI technology, making it easier to replace by machines. In contrast, the value of artwork lies in the author’s thoughts and emotional expression, which is difficult for AI to achieve and requires the unique perspective and creativity of human artists.

Although AI creation is increasing, human creativity remains irreplaceable in terms of artistic expression. Finding a balance between copyright protection, creative tools and human expression is key to the sustainable development of NFT and cryptographic technologies.

Final thoughts

The NFT world is evolving rapidly, with new trends and developments emerging monthly. April was no exception, as the market for these digital assets experienced significant fluctuations and new developments. While the increase in trading volume at the beginning of the month followed a decline towards the end, the NFT market remains a dynamic and promising sector.

As the NFT market grows and matures, it is important to stay abreast of the latest trends and developments. By understanding the opportunities and risks associated with this new technology, investors and traders can make informed decisions and harness the potential of NFTs.

This piece is contributed by Footprint Analytics society,

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