The number of NFTs minted on Ethereum is down 79% since the start of the year.
Here’s what an on-chain analysis from TradingPlatforms reveals a few days ago.
The report shows the daily chart of new NFTs minted on the Ethereum network showing that they averaged over 10,000 in January, while falling below 3,000 in August.
The long decline of NFT on Ethereum
Even more striking is the comparison to 2022, as the highest peak of NFTs minted on Ethereum in a single day, dated June 2, was nearly 470,000.
Excluding the single daily peak on June 2, an average of about 350,000 new NFTs were minted per day from late May to early July last year. But they had already fallen below 50,000 by the end of July and below 30,000 by August.
Since then, the decline has been almost continuous, with the exception of a brief peak in mid-September.
In the past 12 months, the number of new NFTs on Ethereum has increased more than tenfold, from just under 50,000 to under 3,000.
Current levels are similar to those of February 2021, when the bull run of NFTs was just beginning.
It is worth noting that between July and August 2019, there were almost twice as many new NFT volumes as there are now, although there was no bull run in the NFT market at that time, and it was still a long way off.
Therefore, the one in 2023 is not just a normal post-bubble slump, but a real historic drop in NFT creation.
The analyst’s comment
The financial analyst at TradingPlatforms, Edith Reads, commented on this analysis saying:
“It is difficult to pinpoint the exact cause of this decline, but it is likely due to a combination of factors. These include increasing competition from other blockchain networks entering the NFT space, market uncertainty caused by volatility in crypto prices, and saturation of supply relative to demand.
In other words, these would be external causes to Ethereum, but internal to the crypto industry and the NFT market.
Competition
It is certainly true that until at least 2020, Ethereum had almost no competitors in this field.
In addition, one of its main competitors, Polygon, is its own layer-2 solution, so not a real competitor aimed at moving users away from Ethereum.
On the other hand, however, it is also true that Ethereum now has many competitors when it comes to NFTs, starting with Solana.
The data reported by TradingPlatforms pertains only to Ethereum.
However, one should not make the mistake of believing that when it comes to other blockchains, the number of new NFTs being minted on a daily basis is growing. In reality, they are all decreasing somewhat, and it is quite possible that the total number including all blockchains is decreasing as well.
Furthermore, 2022 was the year of the biggest expansion of competition, so the drop in NFTs minted on Ethereum in 2023 is only partially due to competition.
The crypto bear market
A bigger role was certainly played by the crypto bear market.
Indeed, the less profit there is for those trading on the crypto markets, the less money there is to buy NFTs.
However, it is worth noting that the crypto bear market started in late 2021 and hit its first low precisely in June 2022.
At the same time, June 2022 was by far the single month in which the most NFTs were ever made on Ethereum, and this is somewhat consistent with the assumption that the bear market is the reason for the decline in new NFTs.
In addition, the crypto market has been recovering since January 2023, while the creation of new NFTs continued to decline.
Probably from this point of view, the burst of the speculative bubble in the NFT market counted more than the crypto bear market.
The lack of demand for NFT on Ethereum and competing networks
Perhaps the biggest reason is precisely the saturation of supply relative to demand.
It should be remembered that NFTs created and sold in the primary market will eventually enter the secondary market and will remain there forever.
Creating new NFTs is useful for feeding the primary market, but not necessary for the secondary market.
On the contrary, it is possible that with the burst of the speculative bubble in the NFT market, a real saturation of the supply in the secondary market was reached, also in view of the falling demand.
This may also have had an indirect impact on the primary market, resulting in a collapse in demand for new NFTs.
It is important to remember that on OpenSea, the most historic and most important NFT marketplace out there, trading volume fell from nearly $700 million in June 2022 to $161 million in June 2023, and still fell below $130 million in July .
It is clear that the lack of demand started to become serious, and this eventually affected the primary market as well.
Now the question is, will this market recover? And if so, how far has it gone in the meantime?