NFT sales rise for first time in 7 months in November despite fall in crypto price

Sales of non-fungible tokens (NFT) in November rose for the first time in seven months to a peak of $530 million, shrugging off the sharp falls in cryptocurrency prices following the collapse of Bahamas-based crypto exchange FTX.com earlier in the month.

Sales in November rose 13.2% in value from October, despite an 18.75% decline in individual transactions, according to NFT aggregation website CryptoSlam.

The market turbulence makes it difficult to draw concrete conclusions about what drove the increase, Yehudah Petscher, NFT relationship strategist for CryptoSlam, said in an interview with Discard.

Enthusiasm remains for the future of NFTs in a Web3 decentralized internet built around blockchains, but “there’s just more and more confusion about the short term,” he said.

Giulio Xiloyannis, co-founder of Web3 venture capital studio LiquidX, said that so-called “whales”, or investors with large stakes in NFTs and cryptocurrencies, are more resistant to shocks like FTX and seek opportunities in a market downturn.

That may help explain the higher-value sales even as transaction numbers fell, said Xiloyannis, who is also CEO of Pixelmon, which develops metaverse-based online role-playing games.

Damage

Despite November’s gains, Petscher said Discard that the concern about how the damage could spread from the FTX collapse created uncertainty in the NFT market.

A wallet linked to FTX’s now-defunct brokerage arm Alameda Research holds 57 NFTs from the highly sought-after Bored Ape Yacht Club (BAYC) and Otherside collections, including 31 BAYC considered rare. The collection, which remains in an Alameda wallet, could be worth millions of dollars.

FTX’s investment arm, FTX Ventures, was also an investor in BAYC creator, Yuga Labs.

“Everybody waiting to see what the trickle-down effect is from that,” Petscher said, “there are still reasons why people aren’t ready to dive right back into the deep end with NFTs, because we don’t feel like we “have seen all that is destined to happen or that may yet happen.”

One of the blockchains most affected by the FTX collapse was Solana. It had a market capitalization of $11 billion at the start of the month, which had fallen to just $4.9 billion by Friday afternoon in Asia.

However, some Solana-based projects continued to sell over the past 30 days, with y00t, DeGod and Claynsaurz all sitting in the top 25 collections for the month.

As usual, the “blue chip” collections associated with BAYC dominated the top of the list, as did other favorite CryptoPunks. BAYC saw over $60 million in transactions in the last 30 days, more than double that of fellow Mutant Ape Yacht Club.

Headwind

A negative development for NFTs is the announcement by Coinbase Global Inc., the largest crypto exchange in the United States, that customers using the Apple Inc. operating system will no longer be able to send NFTs using Coinbase’s wallet.

This is due to a policy change to give Apple 30% of the “gas fees” required to process NFT transactions.

“Apple has introduced new policies to protect their profits at the expense of consumer investment in NFTs and developer innovation across the crypto ecosystem,” Coinbase tweeted by announcing the change.

Last month Discard reported a controversial trend in NFT marketplaces, particularly those based on the Solana blockchain, to make payment of royalty fees optional.

Market leader OpenSea still requires royalty payments, while the largest Solana-based marketplace, Magic Eden, had made the fees optional as a way to attract users.

However, Magic Eden said on December 1 that it will release a tool that will allow creators to enforce royalty fees.

“I just think [marketplaces] everyone has to decide what’s best for their platform and their audience,” said Petscher. “If their market is strictly collectibles and those collectors decide they don’t want to pay those royalties, so be it.”

Bad actors

Xiloyannis said that despite the decline in the capitalization of the NFT market, the industry is in a better position now than it was 12 months ago when the value was about five times what it is today.

“More entrepreneurs spend time and resources building; the abundant capital raised during the bull market is now actually being used to develop viable business models,” he said.

The fallout from the collapse of FTX and the Terra-Luna stablecoin project earlier this year will bring greater investor and regulator scrutiny, he said.

“This will increase the quality and caliber of entrepreneurs as well as projects available to invest in, filtering out lower quality or questionable proposals,” he added.

Petscher held similar views. “Use this as the opportunity to get the bad actors out,” he said.

“Let’s get the regulations in here. And that way, next bull run, we’ll have something that’s actually sustainable, and we’ll have a solid foundation.”