Ethereum’s Enigma: Dominance in value but not in sales
The NFT space is filled with captivating developments, illustrating an industry in a state of continuous expansion and transformation. As we mark one year since the landmark Terra Luna event, the market displays evident signs of maturation and progressive growth. However, this evolution comes with changes in the status quo. Read this report to find out more.
- In May 2023, NFT sales could fall below $1 billion for the first time this year, as trading volume is currently $333 million from 2.3 million sales.
- Daily unique active wallets (dUAW) linked to NFT activities surged by 27% in May, reaching 173,000, partly fueled by the hype around Milady Maker collection.
- Ethereum dominates 81% of the NFT market with $270 million in trading volume but only has a 5.7% share of total NFT sales. Instead, Polygon leads in sales count with a 26.9% share.
- Despite its roots in the DeFi sector, Arbitrum is demonstrating potential in the NFT market, overseeing 69,000 sales with a trading volume of just $1.5 million.
- Blur significantly leads the NFT marketplace with a 62% stake on trading volume, while OpenSea, despite having a larger user base (104,882 traders vs. Blur’s 12,747), only commands 26% of the market.
- Over 7.4 million Bitcoin Ordinals have been minted, with the Ordinal Punks and TwelveFold collections having trading volumes of 11.85 and 14.9 BTC respectively, making them prominent players.
Table of Contents
- NFT market overview amid meme hype
- The rise of alternative NFT blockchains beyond Ethereum
- OpenSea vs Blur: the battle for NFT marketplace dominance
- Bitcoin Ordinals vs. traditional NFTs: understanding the impact on the Web3 ecosystem
1. NFT market overview amid meme hype
In May 2023, the NFT market has shown signs of a potential shift. As of mid-month, the NFT trading volume has reached $333 million with 2.3 million sales, a trend that, if it continues, may result in the first month this year with a trading volume under $1 billion.
One significant trend that has emerged in the NFT market, at the beginning of the month, was the considerable number of traders selling their large NFT holdings at a loss to participate in the Memecoin frenzy.’ This has led to an uptick in on-chain activity, subsequently driving Ethereum’s gas fees above $100. This increase in transaction costs has negatively impacted the volume of low-value NFT trades on the blockchain, as traders grapple with affordability concerns.
However, amid the presented challenges, there has been a notable increase in the number of daily active wallets interacting with NFTs, partly driven by the activity surrounding the Milady Maker collection. The average daily unique active wallets (dUAW) connected with on-chain NFT activities in May is 173,000, marking a 27% increase from the previous month. The activity peaked on May 4, with 252,000 active wallets.
Elon Musk’s tweet on May 10, 2023, which included a reference to the Milady Maker collection, was a significant event that fueled trading volume. The tweet led to a trading volume spike for the Miladies collection, reaching $13.95 million, an impressive 1,982% increase from the previous day. Furthermore, the number of Miladies trades more than doubled in the same week, from 1,155 to 2,677.
Another noteworthy event was the Pudgy Penguins project securing $9 million in seed funding, led by 1KX. The project also debuted its Pudgy Toys collection on 18 May. In the following week, the collection amassed a total trading volume of $7.89 million, marking an 89.65% increase and securing the sixth position in our seven-day NFT rankings.
A glance at the top ten NFT sales reveals that stalwarts like the Bored Ape Yacht Club (BAYC) and CryptoPunks continue to hold their dominance in the NFT landscape. However, a new entrant has emerged in the sixth position – an ADA handle, which is a personal crypto domain on the ADA blockchain. This handle was sold for a significant $182,089, equivalent to 500,000 ADA. This development is particularly intriguing as it indicates a growing trend of identity service providers being built on various blockchains
2. The rise of alternative NFT blockchains beyond Ethereum
Since the dawn of the NFTs, Ethereum has consistently remained the most preferred blockchain for the majority of NFT collections. As of mid-May 2023, Ethereum continues to command the NFT industry, dominating 81% of the market with over $270 million in NFT trading volume. However, when it comes to the number of NFT sales, Ethereum’s dominance slips to just 5.7%, indicating that the blockchain is primarily being utilized for conducting large-volume sales, positioning it as the platform of choice for the “NFT aristocracy”.
However, other blockchains are also making their mark. Solana holds the second spot, with a trading volume of $22.7 million, representing 6.7% of the total trading volume, and commanding a 13% share of NFT sales. Following closely is Polygon, which boasts a trading volume of $18.2 million and a significant 26.9% dominance over NFT sales, making it the most dominant blockchain in terms of sales count. This aligns with Polygon’s recent strategic moves, as various Web 2.0 projects have chosen it for launching NFT projects with a low entry price and there are a lot of games with NFT mechanics on Polygon, like Planet IX, The Sandbox or Oath of Peak.
In the fourth position, we find ImmutableX, with an NFT trading volume of $9.4 million and a sales count dominance of 7.6%. What’s intriguing about ImmutableX is its sole focus on blockchain gaming. This specialization illustrates the growing significance of gaming in the blockchain space, which is becoming a major driver of the NFT transactions.
Staying within the realm of blockchain gaming, WAX blockchain despite its mid-month trading volume of $728K, which might seem modest compared to other blockchains, stands out with an impressive 21% dominance over NFT sales. This high sales count dominance aligns with the pattern observed in the most dominant dapp on the blockchain, Alien Worlds. The gameplay in Alien Worlds, which involves low-volume NFT transactions, underscores the unique appeal and potential of gaming-focused blockchains.
Furthermore, emerging blockchains are stepping into the NFT scene with promising results. Mid-May trading volume on Cardano surpassed $1.4 million, accompanied by a robust sales count of 15,587. Notably, Arbitrum, known for its strong performance in the DeFi sector, appears to be attracting NFT traders as well. Despite a modest trading volume of just $1.5 million, it has already facilitated over 69,000 NFT sales.
In conclusion, while Ethereum continues to lead the NFT collectibles market in trading volume, other blockchains are carving out niches, demonstrating the continuous diversity and dynamism of the NFT landscape.
3. OpenSea vs Blur: the battle for NFT marketplace dominance
In the dynamic world of NFTs, the race for marketplace dominance is always worth monitoring. As of mid-May 2023, Blur holds the lead with a significant 62% market share, leaving OpenSea trailing at 26%. However, OpenSea retains the most traders, boasting 104,882 active users over the past seven days compared to Blur’s 12,747.
Blur’s season 2 incentives and Blend’s impact on NFT market dynamics
Blur’s ascendance was catalyzed by a successful Season 1 and subsequent token launch, which enabled it to surge ahead of OpenSea in trading volumes. Now, during its Season 2 incentives campaign, Blur is taking a unique approach. Along with traditional bidding and listing points, the marketplace is incentivizing traders to list their NFTs exclusively on its platform by offering rewards. A whopping 300M BLUR, equivalent to $186M, has been set aside for this purpose.
This strategy has had a significant impact on the trading of CryptoPunks NFTs. In April, Blur accounted for an overwhelming 91% of CryptoPunks NFT trading volume, despite the collection being native to a different marketplace. In May, it dipped to 73%. The fact that the collection started to be massively traded again suggests market manipulation by whales seeking to farm on Blur.
In early May, Blur launched Blend, a lending protocol controlled by token-holders, enhancing its competitive positioning.
The implications of this move are yet to be fully understood, particularly for potential buyers who could lose their initial investment. However, Blur’s speed and adaptability to market changes make it well-positioned to navigate these challenges.
On May 15th, Blur, the leading NFT marketplace, broadened its Blend lending platform by integrating the Bored Ape Yacht Club (BAYC) and Mutant Ape Yacht Club (MAYC). This strategic move empowered users to leverage their BAYC and MAYC assets, allowing them to borrow up to 40 ETH at a nominal cost of just $1. This integration had an immediate and pronounced impact on the trading volumes of BAYC and MAYC, which surged 154% and 30% respectively on the announcement day.
Historical patterns from previous listings such as Azuki, CryptoPunks, and DeGods on the Blend platform indicate that such announcements often trigger a short-term influx in trading volume, acting as a catalyst for price action. However, these surges tend to be ephemeral and are typically followed by a retracement as the initial excitement fades and the market reestablishes its equilibrium.
However, it’s not all smooth sailing for Blur. The upcoming Season 2 airdrop could result in substantial short-term sell pressure as farmers offload their allocation. The use of BLUR to incentivize borrowing and lending on Blend may also lead to structural selling. Combined with a lack of utility, these factors are likely to exert downward pressure on the BLUR price until the Season 2 rewards are distributed, and there’s more clarity on the token’s role in relation to Blend.
OpenSea Pro: advanced features for NFT traders
OpenSea has been actively implementing strategies to regain its market dominance from its competitor, Blur. The introduction of OpenSea Pro, a state-of-the-art marketplace enriched with advanced features, is a significant step in this direction.
Designed specifically for the burgeoning community of professional NFT traders, OpenSea Pro has been instrumental in the platform’s endeavor to counter Blur’s increasing influence. This marketplace operates with zero fees and aggregates listings from over 170 marketplaces, ensuring traders access to the most competitive deals.
Despite these innovative measures, as of May, OpenSea is yet to surpass Blur in terms of market dominance as we’ve seen above. However, OpenSea Pro continues to refine its user experience, introducing Farmer Wallet Labels and highlighting top-collection offers. Given that Blur airdrop farming constitutes a substantial portion of the NFT volume, these features provide valuable insights for discerning real purchases from temporary holders intending to flip immediately.
While these advancements from Blur and Opensea might appear minor in isolation, their cumulative impact over a year can significantly transform the product offering and shape the future of NFT trading.
4. Bitcoin Ordinals vs. traditional NFTs: understanding the impact on the Web3 ecosystem
Bitcoin Ordinals, the latest innovation to hit Web3, has become a hot topic in the dapp community. Since its launch by software engineer Casey Rodarmor on January 21, the protocol has garnered a significant following, with over 7.4 million Ordinals minted at the time of writing. However, this new form of digital asset is also somewhat misunderstood, with many people unsure how to buy or create them.
One of the key differentiators between Ordinals and other non-fungible tokens (NFTs) is their “completeness”. While many NFTs require off-chain data, Ordinals house all of their data directly on-chain, thus earning the label “digital artifacts” from Rodarmor. He suggests that Ordinals embody what NFTs should be and what inscriptions inherently are. Interestingly, Ordinals don’t have creator royalties attached to them, which is a common feature among NFTs.
The introduction of Ordinals not only represents a shift in Bitcoin’s cultural landscape but also serves as a potential technical upgrade to NFTs. This development has given rise to intriguing collections and impressive sales, with Ordinal Punks and TwelveFold as notable examples. These collections have seen trading volumes, in the past 30 days, of 11.85 BTC and 14.9 BTC respectively.
However, Bitcoin Ordinals and the rise of the BRC-20 token standard, which enables the deployment of meme coins on the Bitcoin blockchain, have provoked concern among Bitcoin maxis. The BRC-20 standard has seen impressive growth, with over 18,000 new tokens created and a total market cap of around $546 million. Ordi, the native asset of the Ordinals Protocol, accounts for a whopping 67% of the entire BRC-20 market cap.
Despite the opportunities, these innovations have strained the Bitcoin network, leading to a backlog of unconfirmed transactions and increased fees. The spike in transaction demand caused fees to soar to $31 on May 8, 2023. Although the fee has since dropped to $5.6, it remains relatively high, especially considering it was only $1.20 in mid-April.
The silver lining to this increased activity is a boost in miner fees, which enhances the overall security of the Bitcoin blockchain. Even though the scarcity of blockspace on the Bitcoin network has long been a concern for scalability, the recent fee surge indicates a growing number of people using Bitcoin for non-financial purposes, such as creating and trading Ordinals and speculation on tokens.
In conclusion, while the overall NFT trading volume may have taken a downturn this month, the resilience of the sales count paints an encouraging picture. Intriguingly, Polygon has risen to the forefront, becoming the dominant blockchain protocol by NFT sales. This is a clear sign of an increasingly diversified NFT landscape.
It appears that Ethereum, while still significant, may have found its niche among the ‘NFT aristocracy’. This leaves room for other blockchains like Polygon to cater to a broader market, potentially democratizing access to NFTs.
The shifts we have witnessed suggest we might be heading down the pathway to wider adoption that we’ve been anticipating. As the industry continues to evolve, we remain watchful and excited to report on the new developments that await us in the ever-fascinating world of NFTs.