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Metanomics Mondays
A weekly long-form examination of the NFT market every Monday. Follow us on Twitter at @nameless_nft as we discuss the latest column each week.
NFTs - the reports of their death may be greatly exaggerated
On May 1st, the Yuga Labs team sold 55,000 plots of virtual land for their upcoming Otherside metaverse project raising approximately $320 million USD. Secondary sales amounted to over $750 million in the first five days after launch. Calls for the death of NFTs looked to be premature in light of this flurry of market activity even in the face of persistent weaknesses in the NFT art markets and six months of significant declines in crypto prices overall. Furthermore, premium profile-picture-projects (PFPs) like Azuki, Doodles, and Bored Apes all continued to hold near their all-time highs as optimism for this new digital-social-club experiment remained strong and seemed like they could carry the market through a crypto correction.
The next two months, of course, have proven much more painful than even the harshest critics could have imagined. The $40 billion dollar Terra ecosystem collapsed. The large crypto hedge fund, Three Arrows Capital, is now in the process of fully liquidating. A number of crypto exchanges and lending platforms have restricted withdrawals, entered bankruptcy or received emergency funding. The market cap of all cryptocurrencies has fallen by nearly 50% since May 1st. And NFTs did not come out unscathed either. Trading volume on the largest NFT marketplace, OpenSea, fell from $3.4 billion USD in April to just $696 million in June. Daily volumes are now averaging only $17.5 million per day over the last 7 days.
However, even as trading volumes and floor prices have fallen significantly compared to the height of the bull market mania of the last year, it is important to not lose sight of the tremendous growth that has occurred. Trading volumes on OpenSea were up by more than double in June relative to the year before, and 750x relative to the year before that (OpenSea saw less than 1 million dollars in secondary sales in June, 2020). The numbers of NFTs traded on the platform has also remained relatively strong - so far July is on pace for one of OpenSea’s busiest months both in terms of total NFTs traded and the number of active wallets.
On top of this, blue-chip NFTs are holding their own in the face of a falling price of ETH. Floor prices for Bored Apes continues to hold strong (still costs 100 ETH to buy one), premier Art Blocks collections such as Tyler Hobbs’ Fidenza and Snowfro’s Chromie Squiggle floors have appreciated significantly in recent months, and top tier artists such as XCOPY, Issac “Drift” Write, and Grant Yun, among many others, are all seeing renewed demand for their work. It is of course difficult to separate cyclical and long-term movements in any market, let alone one so new as NFTs, so how the prices of digital art and PFPs hold up in an extended crypto bear market is still yet to be seen. But regardless of how prices evolve, NFTs have clearly proven themselves an excellent technology for authenticating and proving ownership of digital assets. The case for their existence has been made.
It is still early days for NFTs. We of course believe NFTs are how people will own and authenticate digital assets in the future. The growth in the past few years has been nothing but astounding. And yet with still less than 2 million Ethereum wallets ever making an NFT transaction - less than the number of people typically playing Fortnite at any one time - the room for further growth is huge. The potential to expand in the collectibles, trading cards, gaming, ticketing, literature, and music markets on top of what has already been built with art and PFPs is very exciting.
Nameless makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in Metanomics. The information, opinions, and recommendations presented in Metanomics are for general information only and any reliance on the information provided in Metanomics is done at your own risk. The information provided by Metanomics should not be construed as financial, legal, or business advice, or professional advise of any kind.
The author may be an investor in one or more of the companies, investment products, or NFT projects mentioned in this article.