The NFT market has experienced a significant contraction in 2023, with daily trading volumes plummeting compared to previous highs, as indicated by a recent NFT report by Galaxy. This decline can be attributed to Ethereum’s price outpacing NFT projects, leading to a breakdown of their previously strong positive correlation. Despite this downturn, NFT activity remains higher than the 12-month lows witnessed in November 2022, although daily trading volume has declined each month throughout 2023.
One notable player in the NFT marketplace sector is Blur, which has reached an all-time high dominance in trading volume at 80%. This surge is primarily driven by airdrop farmers seeking to benefit from Blur’s season 2 token airdrop. Notably, the top 1% of Blur traders account for a staggering 64% of the platform’s volume, in contrast to OpenSea, where the top 1% accounts for only 20% of the volume.
OpenSea, catering more to the retail collector market, has made strategic moves to attract professional traders by introducing a pro trading platform and reducing fees. Consequently, OpenSea has experienced a significant increase in trading volumes, rising to 23.7% (+52%), while Blur has seen a 15% decrease.
OpenSea’s endeavor to compete for professional traders’ attention is a bold move, considering that Blur’s user base is skewed towards professionals, with the top 1% of users contributing approximately 64% of the platform’s trading volume. Despite this competition, the short-term sentiment in NFT marketplaces is overshadowed by declining floor prices for top-tier blue chip projects, as collectors seek to reduce investment risks in response to the contracting market.
The report suggests that NFT royalties are becoming less relevant as the market turns bearish, prompting creators to explore new income strategies. Both Blur and OpenSea have witnessed a significant decrease in royalty fee transactions, indicating that creators are likely in need of alternative income-generation approaches. The report also notes that OpenSea’s user base is considered more organic and potentially more sustainable in the long run, while Blur’s dominance is primarily driven by short-term whale activity.
Despite declining floor prices for popular NFT collections, some blue chip projects have shown resilience during the bear market. Notable examples include Bored Ape Yacht Club, Doodles, Mutant Ape Yacht Club, CloneX, and Moonbirds, all of which have experienced declines of over 64% from their all-time highs. Moonbirds has been hit the hardest, with a 92% drop and a 49% decline year to date.
Outlook for the NFT Market
The report highlights the introduction of Bitcoin-based NFTs, called Ordinals, as a factor driving renewed interest in the NFT space. Additionally, key indicators to watch for the return of NFT activity are ERC-721 versus ERC-20 token transfers and OpenSea’s retail trading volume. The report concludes that until a major rebound occurs, the NFT market will primarily be driven by professionals.