- There has been a surge in NFT and DeFi activity on Ethereum.
- Despite the high demand for ETH, the supply continues to decline.
The Ethereum [ETH] The network has experienced an increase in activity around non-fungible tokens (NFTs) and decentralized finance (DeFi) in recent weeks, on-chain data shows.
This growth in network activity follows an extended period of decline as NFT sales volume and the total value of DeFi (TVL) plummeted to new lows.
Ethereum’s NFT and DeFi ecosystems
In November, Ethereum-minted NFTs recorded a sales volume of $348.61 million, according to data from CryptoSlam.
AMBCrypto found that this was the first time since February that the chain recorded a month-on-month (MoM) increase in sales volume.
Source: CryptoSlam
For context, Ethereum recorded an NFT sales volume of $949.49 million in February. However, as bearish sentiments plagued the entire crypto market in the first and second quarters of the year, NFT trading activity severely declined.
Dates of NFTGo showed that the overall NFT market cap peaked at $10 billion on February 20 and has been on a downward trend since then.
Between February and October, NFT sales volume on Ethereum fell by 82%. However, overall market sentiment improved in November, leading to a resurgence in NFT trading activity.
Last month, the overall NFT market cap grew by 39%. Reflecting the growth in the overall market, Ethereum’s MoM sales volume increased by 108%.
As for the DeFi vertical, it also saw growth in TVL. Dates of DefiLlama showed that between November 1 and 30, the chain’s TVL increased by 15%.
Source: DefiLlama
The network’s TVL at the time of writing was $26.64 billion, the highest since July.
But there’s a catch…
While the growth of NFT and DeFi activity is good for the chain, it could result in a potential increase in the supply of ETH due to the current increased demand for the altcoin.
Pseudonymous CryptoQuant analyst Nino found it that the resurgence of NFT and DeFi activity on the Ethereum network has led to growth in the standard deviation (SD) of ETH withdrawal transactions from exchanges.
This means that the average size of ETH withdrawal transactions becomes more variable. In other words, there are more large and small withdrawal transactions than before.
How many Worth 1,10,100 ETHs today?
Nino based on ETH’s historical performance and said:
“As during previous bubble periods, an increase in demand for DeFi and NFTs would necessitate a greater supply of ETH. This could lead to greater price volatility.”
Interestingly, despite last month’s surge in NFT and DeFi activity, supply continues to decline. Dates of Ultrasound.money showed that 32,012 ETH tokens worth approximately $66.95 million were withdrawn from circulation in the past month.
Source: Ultrasound.money