OpenSea, the world’s largest nonfungible token (NFT) marketplace, has seen a significant decline in daily volumes as concerns about a potential market bubble rise.
OpenSea volume is at a yearly low.
Notably, the marketplace executed over $5 million in NFT transactions on Aug. 28 — nearly 99% less than its record high of $405.75 million on May 1.
The significant drops in daily volumes coincided with equally drastic drops in OpenSea users and transactions, implying that the value and interest in blockchain-based collectibles has declined in recent months.
This is also reflected in the main digital collectable projects’ lowering floor prices — the minimal amount one is willing to pay for an NFT.
The floor price of the Bored Ape Yacht Club, for example, fell 53% to 72.5 ETH on August 28 from a peak of 153.7 ETH on May 1.
Similarly, the floor price of CryptoPunks, another popular NFT collection, has fallen over 20% from its July peak of 83.72 ETH.
The NFT boom is about to explode. NFT pricing are listed in the currency of the blockchain on which they are launched. As a result, a digital collectible developed on Ethereum will be purchased using Ether (ETH), implying that NFT prices will decline if ETH’s market valuation falls.
One of the key drivers of the low NFT data looks to be a negative ETH market. Notably, the cost of one Ether has dropped from $4,950 in November 2021 to under $1,500 in August 2022.
BendDAO votes to increase the liquidity of NFTs.
BendDAO, a decentralised autonomous organisation that allows NFT owners to collateralize their digital collectibles for loans (in ETH) worth 30%-40% of the NFT’s floor price, voted last week to update the code of its protocol to make its NFT collateral more liquid.
The vote took place after an increase in the value of ETH-denominated loans in dollar terms. Meanwhile, NFT prices have dropped, lowering the value of the collateral held by BendDAO.
As a result, BendDAO is currently experiencing its own financial crisis, in which borrowers are unable to repay their dollar-denominated loans due to declining ETH values, and lenders are unable to reclaim their borrowed sums due to falling collateral valuations.
Prosecutors intend to classify NFTs as securities, according to the legal team of a former OpenSea employee.
BendDAO’s most recent vote reduced the NFT liquidation threshold from 95% to 70%. To encourage more bids for their NFT collaterals, it has also lowered the period allowed to borrowers to avoid liquidation from 48 hours to four hours.
In other words, if market liquidity continues to dwindle, the floor price of NFTs, including BAYC, risks falling much further.
