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While the broader crypto market appears to be moving towards a potential bull market phase, the non-fungible token (NFT) sector, led by collections like CryptoPunks and Bored Apes, is experiencing a contrasting trend.
The Nansen NFT-500 index, which measures the valuation of the top 500 NFTs, has seen a 50% decline year to date when measured in Ether (ETH) and a 16% decline in US dollar terms.
Meanwhile, the Blue-Chip 10 index, an index that focuses exclusively on the most popular NFT collections such as CryptoPunks and the Bored Ape Yacht Club (BAYC), is down 44% in ETH terms and 1.7% in USD.
Negative correlation between NFT and ETH prices
In comments provided to CoinDesk on Thursday, ContentFi chief operating officer Nick Ruck attributed the subdued NFT market performance to the negative correlation between NFT prices and the price of ETH.
He noted that NFTs have survived their initial market cycle but have not seen any new technological breakthrough or significant user interest, unlike popular decentralized finance (DeFi) protocols such as Uniswap.
Despite the overall dip, there are signs of growth in the NFT market, especially in NFTs that are based on utility in gaming rather than simple so-called JPEGs, and in the Bitcoin Ordinals space.
“Bitcoin ordinals is not only a breakthrough for Bitcoin’s utility, but also a hub that brings communities together,” Ruck said, noting that a number of entities from outside the crypto sector are currently exploring ways to get involved in the Ordinals craze.
“[…] Everyone has found common ground and wants a piece of it,” he said.