Preface
The recent popularity of Send it on Solana has made the stagnant NFT market a hot topic again. The market's attention has also made everyone think: Can NFTs pick up again? It has been two years since the NFT narrative went from the Spring Carnival in 2022 to being completely marginalized. Even in this bull market, NFTs have not seen any signs of recovery. The new narrative is weak. Opensea, BAYC, Azuki, these star projects that were in their heyday at the time, have almost disappeared in the current market. It seems that it is the default consensus of most Web3 users that NFTs are completely hopeless.
The dire situation
1. Trading volume has shrunk significantly
NFT market weekly average transaction volume (source: nftpulse)
From August 2021 to May 2022 (the so-called NFT summer), the average weekly market trading volume was over $1 billion, reaching $3.24 billion at its peak, which is comparable to the total trading volume of Uniswap. However, even at a time when DeFi is not popular, Uniswap's daily trading volume is still over $1 billion, while the weekly trading volume of the NFT market is now only around $100 million, less than 10% of its peak. What is even more disappointing is that in this round of bull market cycle, other sectors have rebounded to varying degrees, while NFT is completely decoupled from the market in terms of market popularity and the amount of funds entering the market, and it looks like a piece of mud that cannot be helped.
2. The trading market continues to be sluggish
Current status of the trading market (source: Dappradar)
The entire NFT trading market is dominated by OpenSea, Blur and Magic Eden, which occupy nearly 80% of the market share. OpenSea is a typical platform that relies on its past achievements. It has not seen any positive measures in the past two years. It barely maintains the first place by relying on its huge user base. The trading volume has shrunk by more than 90%, and the platform's monthly income is only US$740,000, which is comparable to Curve (US$790,000), which is plagued by negative news. The two are also in the same boat.
Blur once showed a trend of catching up, but with the weakening of airdrop incentives and the end of Blast, it was unable to hold up the banner.
Magic Eden has an advantage in the BTC and SOL ecosystems, but unfortunately these two chains cannot be compared with ETH in terms of user volume or project market value. A large part of the current trading volume depends on potential airdrop expectations.
3. Blue chips are falling, and the wealth-creating effect is no longer there
For many users who have been deeply involved in the last round of NFT (especially Ethereum NFT), the most intuitive impression of NFT is a bunch of small pictures in the warehouse that have returned to zero and blue chips that have been forced to sell.
Top NFT transaction volume and floor price (source: OpenSea)
Blue chips are in this situation, not to mention small and medium-sized projects. Except for a few with strong market makers that can barely hold their ground, the rest are no different from .jpg files.
At the same time, project updates in the market have also stagnated. Currently, there are basically no popular NFT projects to be launched on X, and even if they are released, they face the embarrassing situation of no one minting - breaking the price at the opening - and passively returning to zero.
A few projects that can temporarily break out of the circle by relying on celebrity effects or community support can hardly escape the fate of reaching their peak as soon as they open. There will no longer be evergreen projects like the previous round.
Ordinals and the dawn of ERC404
1. Bitcoin NFT lacks stamina
In December 2023, the sales of Ordinals (Bitcoin NFT) reached 881 million US dollars, which once exceeded the sales of Ethereum and Solana. Although there is still a certain gap from 2022, it at least allows the market to see the dawn of revival.
Bitcoin ecosystem NFT data (source: OKX)
In the fourth quarter of 2023, blue-chip projects such as Bitcoin Frog and NodeMonke emerged in the market. BTC Frogs’ floor price reached as high as 0.42 BTC, with a daily trading volume of more than 50 BTC. NodeMonkes’ highest price was close to 1 BTC, with a market value exceeding that of BAYC, the leader of Ethereum NFT at the time, and a daily trading volume of 163 BTC.
Ordinals market volume (source: Block)
But the good times did not last long. In January 2024, the transaction volume of the BTC NFT market fell by more than 24.7% month-on-month. By May, the transaction volume of Bitcoin NFT had dropped by 80.5%. The number of NFT traders also decreased compared with previous months, especially Bitcoin. The number of traders decreased from 393,000 in April to 114,400. The total market value fell by more than 90%, and the top projects fell by more than 80%. They have not been able to reverse the downward trend in the following months.
Ordinals expanded the users of NFT to the BTC ecosystem, bringing a group of participants with higher net worth to the entire industry. However, due to the high handling fees and unfriendly user experience of the BTC ecosystem and the lack of NFT community culture, the demand for short-term price increases of projects is more urgent. A large number of participants left the market in a hurry when they saw that the profit expectations were no longer there. The flywheel of the market often comes and goes quickly. Bitcoin NFT took only three months to complete the three-year journey of ETH. The more core problem is that Ordinals did not solve the problem of weak narrative of small pictures. In fact, it is old wine in new bottles, and the hype funds left the market in a mess.
Pandora: A flash in the pan
Pandora experienced a surge in February this year. The concept of ERC404 currency duality brought great surprise to the market, especially NFT players. However, there is a strong voice in the community saying that this may be an important opportunity to revive NFT.
The narrative of ERC404 is very attractive. It allows NFT to be traded in fragments, solving the problem of entry barriers that have always plagued the entire NFT track. It combines the liquidity of the two largest markets in the industry, images and coins, and further releases the two-way liquidity of NFT and Token, with new features such as "drawable cards", "native fragmentation" and "AMM liquidity".
Historical trading volume of ERC404 on DEX (source: Dune)
$PANDORA soared 43 times in a week, with weekly trading volume exceeding $300 million and NFT prices reaching as high as 10ETH. However, this situation did not last long. The market was looking forward to the outbreak of the ERC404 protocol, but it did not come. Instead, the market was hit hard in March. The trading volume was almost zero. Although the floor price of Pandora was still 1.2ETH, the best offer was only 0.2ETH, and there were only a few transactions in recent months. The Holders who had shouted that the market value was 10 billion were stuck at the top of the mountain, and they did not even have the opportunity to cut their losses. The entire sector was basically over.
The new gameplay of combining image and currency has brought a certain degree of innovation to NFT, but it cannot solve the problem of NFT liquidity. And it is not the first attempt to fragment NFT. The Fractional and Feisty Doge NFTs in 2021 have both set off a wave of enthusiasm, but in the end, they were all in a mess. ERC404 is also like a replay of a tragedy.
Send it in the blink of an eye
Sendit floor price trend chart (source: Coingecko)
Back to the foreword, SEND has drawn the public's attention back to NFT. The dream of waking up to double the money is particularly attractive during the market volatility. As the overall market has slightly recovered, everyone's attention has shifted, and the price of SEND has returned to the pre-liberation level overnight. Judging from the downward trend of the floor price and trading volume, market sentiment is pessimistic, and Sendit's market may continue to face high volatility in the short term. As the first application of the Blinks ecosystem and a project called by the founder of Solana, SEND still needs more content and time to enrich its story and development.
The road ahead: starting from zero or rebirth?
A very direct reason for the sluggish NFT market is the lack of NFT liquidity: lack of counterparties, valuation difficulties, non-divisible features, and insufficient underlying technical support. To some extent, whoever solves the problem of NFT liquidity will win the entire market. NFT fragmentation, NFTfi, Blur, Ordinals, ERC404, and SEND are essentially trying to solve this problem. Although none of them have been able to provide a complete and effective solution, these projects have made very good attempts and have also received positive feedback from the market. This shows that the basic disk of the entire NFT is still very large. It also shows that despite the deep bear market, innovation in NFT is still being explored. It is still too early to say that NFT is over.
From a more macro perspective, NFT will still be a very important bridge between Web2 and Web3, and its advantages in real-world asset mapping, community connection, brand building, and game empowerment will still exist. NFT and Defi are the most Web3 and Crypto native narratives, and as long as Crypto continues, the story of NFT will not stop.
Credits: Riffi / Mat / Darl
Editing and proofreading: Punko
Special thanks: Thanks to the above partners for their outstanding contributions to this issue.
