NFTs are securities – so it appears the SEC is preparing to take it to court, with OpenSea as a potential defendant.
Regardless of the merits (or lack thereof) of a case against the company, most NFT activity these days takes place elsewhere.
The chart below shows US dollar-denominated trading volumes for NFT marketplaces on EVM chains, represented by the colorful columns in the background. Crypto’s total market capitalization is otherwise reflected by the blue line.
It includes NFT transactions on Ethereum, Base, Blast, Solana and Bitcoin over the past four years.
The data points to over $62.75 billion in NFT trading volumes since August 2020, with OpenSea facilitating nearly 58% of that.
A look at the past year alone shows a total of $11.37 billion in NFT trading volume. OpenSea, based in New York, contributed only 10% of these transactions.
Blur alone processed $3.75 billion, about a third of the total, while Solana marketplaces Tensorswap and MagicEden accounted for 6.6% and 8% respectively.
If we bundle all Ordinals trading under one umbrella, $3.8 billion worth of Bitcoin-native collectibles were traded last year (through early August), making up almost 34% of annual volume. Ordinal volumes are shown in the dark red columns on the map.
(EVM data came from this Dune dashboard by user @hildobby, and from here for Solana volume. Bitcoin data came from CryptoSlam.)
(Both Hildobby and CryptoSlam data filter out volumes suspected of being the result of wash trading, so actual onchain volumes are higher, but this should reflect organic trading activity for most of the NFT market .)
NFTs Go Their Own Way (NGTOW)
Granted, a loss for OpenSea would likely bode ill for other NFT marketplaces.
So there is still room for the SEC to “protect investors,” as the agency sees it, even if that has become a meme in the crypto space.
It has not been proven whether a securities ruling would end NFTs as a valuable concept in crypto. It would probably only encourage artists, publishers and other creatives to distance themselves from their work and thus avoid the Howey test.
Perhaps at worst, there would be less incentive for venture capitalists to delve into various NFT ecosystems – especially if the promise of future profits from the efforts of others was really no longer part of the appeal. And there is more to crypto than venture capital, even if it sometimes doesn’t seem that way.
Be that as it may, NFTs have long been an easy target for haters. Beyond the more ridiculous use cases — from burning works of art to tokenizing farts in jars — even the most popular NFT markets tend to be far less liquid than top fungible cryptocurrencies, not to mention much smaller ones.
This usually makes them much more susceptible to mini-bubbles and other types of manias. That attracts a lot of attention, both positive and negative.
It could be that NFT markets follow their own cycle schedules, possibly separate from the rest of the crypto market.
NFTs have only been traded with any real size for three years, with the largest cycle to date usually occurring within the first.
Blur (in coral pink on the chart above) reignited some of the fire when it launched in late 2022. Bitcoin did it again via Ordinals. And while those volumes have dried up lately, crazier things have happened in the crypto world than NFTs finding sustained market interest.
Unless the SEC ruins everyone’s fun with its potential OpenSea case.
If only it had rained a little earlier at the parades of Sam Bankman-Fried, Alex Mashinsky, Su Zhu, Kyle Davies and Do Kwon. Perhaps we would still be in the grip of NFT mania.