Virtual world NFT sales peaking during pullback
This week saw the biggest drop in crypto prices since the start of the bull run back in December 2020, but is it affecting crypto NFT sales? Bitcoin was slashed in half while Ethereum tumbled almost 30% in 24 hours. The cause? That’s another story entirely, but one thing that has become apparent amidst the turmoil is that NFTs are still selling according to data from DappRadar.
What prompted the analysis was to understand clearly if people were looking to buy NFTs at a discount given the significant drop in the cryptocurrency most associated with NFT purchases – Ethereum. Or whether owners were just hodling them.
A quick glance at the top 20 NFT projects ranked by sales in the last 24 hours certainly reveals more green than most people’s crypto portfolios do today. However, it also gives us some insight into NFT buying behavior. For example, NFTs on Wax is still performing well, while most collections on Ethereum are suffering. This suffering doesn’t only come from the crypto bloodbath, but also from the insane gas price increase that came with it. One transfer would easily cost hundreds of dollars during the major sell-off.
The Wax blockchain has been going from strength to strength recently as a wave of new digital collectibles hit the primary and secondary markets. The self-proclaimed ‘King of NFTs’ has been keeping a relatively low profile amidst weekly million-dollar NFT sales on Ethereum. Instead, Wax has been going about its business in a very planned way.
Wax’s approach of low-value, high-volume NFT collectibles appears to be starting to make waves to a wider audience. The appeal of affordable, and in some cases familiar collectibles such as Street Fighter and Major League Baseball are resonating. Importantly, amidst the crypto bloodbath buyers appear to be just carrying on as normal. Moreover, primary sales for Wax NFTs are paid in fiat currency such as USD. Therefore any peaks or troughs in the price of the native Wax token shouldn’t have much of an impact.
When we rank by volume, the story changes. The OG NFT collection CryptoPunks stands out on Ethereum. Unsurprisingly, buyers were looking to snap up a bargain NFT and CryptoPunks are arguably the gold standard. Additionally, we see notable activity in several virtual world platforms – Decentraland, Polka City, and The Sandbox.
Another point to take on board is that due to the hype surrounding NFTs for most of 2021 many people could have got swept away and bought a CryptoPunk or virtual land at an inflated price and are now trying to cut their losses. In a similar way to how exchanges saw record amounts of Bitcoin sold back to them this last week as investors attempted to consolidate losses.
Looking at the top NFT 10 sales in the last 24 hours reveals more insight. We see eight CryptoPunk sales and a shopping center and hotel in the virtual world PolkaCity. Interestingly, Polka City NFTs reward the buyers with weekly payments.
The CryptoPunk sales give insight into how investors are thinking right now. Furthermore, using the DappRadar Portfolio Tracker to look inside the wallets of the buyers and sellers gives us an even more granular view.
Taking CryptoPunk#4365 that sold for just over $71,000 as an example we immediately see that the buyer has just that single CryptoPunk and a single MeeBit NFT in their wallet. Whilst the seller is sitting on 97 CryptoPunks and 100 MeeBits and a portfolio value of almost $6 million. Here we have a collector selling to a newbie it appears. Arguably, the newbie saw their chance to grab a bargain and took it. The seller’s motivations are unclear, but with so many CryptoPunks in their wallet, it can be assumed this person just wanted to cash in on the dip.
NFTs have been a hot topic in 2021 but more importantly, this crash has given us the opportunity to see how digital collectibles hold up amidst such conditions. Whilst we see a general slowdown in NFT sales, certain NFTs are seeing increased activity and some are acting as nothing happened at all.
Land parcels and virtual world objects are the equivalents of speculating on the success of a project. Buyers are fundamentally buying up real estate in the hope the virtual world hits mass adoption and the value of the land or object increases with demand. For those with absolute belief in virtual worlds buying these NFTs during a dip arguably makes a lot of sense. Similarly, buying one of the gold standards of NFTs is another presumably safe bet.
It will be fascinating to observe activity across all NFT marketplaces and collections as the market will move into the anticipated price recovery phase.