The NFT market is experiencing a contraction in 2023, with daily trading volumes falling significantly from previous highs, according to a recent NFT report by Milky Way.
Ethereum’s price performance has outperformed NFT projects, knocking out their long-standing positive correlation. Despite this, NFT activity remains higher than the November 2022 12-month lows, with daily trading volume decreasing every month in 2023.
NFT Marketplaces
Within the NFT marketplace industry, Blur has seen its trade volume dominance reach an all-time high of 80%, fueled primarily by airdrop farmers seeking to capitalize on the Season 2 token airdrop. “The top 1% of Blur traders account for 64% of the volume of the platform”, compared to only 20% on OpenSea.
OpenSea, which focuses more on the private collector market, has moved to lure professional traders with a pro-trading platform and lower fees, resulting in a consequent increase in trading volumes to 23.7% (+52%), while Blur’s with fell 15%.
It is a bold move by OpenSea to compete for the attention of professional traders as the whaling activity on Blur has shifted its user base towards professionals as the top 1% of users account for approximately 64% of the platform’s trading volume. Meanwhile, short-term sentiment in the NFT market is being downplayed by falling floor prices for prime blue chip projects as collectors risk their investments less in response to the shrinking market.
NFT Royalties
The report states that “NFT royalties are becoming less and less relevant” as the market turns bearish, leading makers to look for new revenue strategies.
Royalty fee transactions have dropped dramatically on both Blur and OpenSea, with creators likely needing new monetization strategies. On the battle between the marketplaces, the report notes that OpenSea’s user base is seen as more organic and potentially more sustainable over the long term. At the same time, short-term whales in particular are driving Blur’s dominance.
Despite falling rock bottom prices for popular NFT collections, blue chip projects have shown at least some resilience during the bear market. Projects such as Bored Ape Yacht Club, Doodles, Mutant Ape Yacht Club, CloneX, and Moonbirds are all down more than 64% from all-time highs. Moonbirds was the hardest hit so far, dropping 92% and 49%.
In assessing the prospects for the NFT market, the report noted that the introduction of Bitcoin-based NFTs, Ordinals, is driving renewed interest in the space. Additionally, signals to watch for the return of NFT activity are the ERC-721 vs ERC-20 token transfers and OpenSea retail trading volume. It concluded that “up to a big rebound, it’s a pros’ game”,