The NFT market is experiencing a contraction in 2023, with daily trading volumes falling significantly compared to previous highs, according to a recent NFT report by Galaxy.
Ethereum’s price performance has outpaced NFT projects, causing a breakdown of their longstanding positive correlation. Despite this, NFT activity remains higher than the 12-month lows in November 2022, with daily trading volume declining each month in 2023.
Within the NFT marketplace sector, Blur has seen its trading volume dominance reach an all-time high of 80%, fueled mainly by airdrop farmers aiming to benefit from its season 2 token airdrop. “The top 1% of Blur traders account for 64% of the platform’s volume,” compared to only 20% on OpenSea.
OpenSea, which caters more to the retail collector market, has moved to lure professional traders with a pro trading platform and reduced fees, resulting in a consequent uptick in trading volumes to 23.7% (+52%), while Blur’s decreased 15%.
It is a bold move for OpenSea to compete for professional traders’ attention as whale activity on Blur has skewed its user base towards professionals, as the top 1% of users account for approximately 64% of platform trading volume. Meanwhile, short-term NFT marketplace sentiment is downplayed by declining floor prices for top-tier blue chip projects as collectors de-risk their investments in response to the contracting market.
The report posits that “NFT royalties are becoming less relevant” as the market turns bearish, leading creators to seek new income strategies.
Royalty fee transactions have dramatically decreased on both Blur and OpenSea, with creators likely needing new income-generation strategies. On the battle between the marketplaces, the report notes that OpenSea’s user base is considered more organic and potentially more sustainable in the long run. At the same time, short-term whales mainly drive Blur’s dominance.
Despite declining floor 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 over 64% from all-time highs. Moonbirds was the worst hit, down 92% and 49% year to date.
In its assessment of the outlook for the NFT market, the report noted that the introduction of Bitcoin-based NFTs, Ordinals, is driving renewed interest in the space. Furthermore, 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 “until a major rebound, it’s a game for pros,”