Trading volume on Top NFT marketplace OpenSea has plummeted 99% since its peak in May – suggesting that the NFT bubble may have burst sooner than anticipated.
On August 28, OpenSea processed $9.34 million in NFT (non-fungible token) transactions, well below its May 1 peak of $2.7 billion, according to data from decentralized applications tracker DappRadar.
The number of OpenSea users also plummeted to just 22,140 on Sunday (September 5) from nearly 60,000 in January, DappRadar data showed.
OpenSea refuted the DappRadar data, telling Fortune that it was an unfair comparison.
A spokesperson said the data tracker compared OpenSea’s record trading day with one of its lowest. The spokesperson added that the company is not worried about the drop in trading volume.
OpenSea prefers to calculate ETH volume, which excludes the effects of the cryptocurrency’s price fluctuations.
Yet even by that metric, monthly trading volume from May to July still fell by 62% and is on track to decline further in August, Fortune said, citing crypto-tracking platform Dune Analytics.
“We’re playing the long game because we see what’s possible, so we’re not that concerned about short-term volatility… We always expected frothiness, hype, and deflation as the community and use cases evolve, the tech gets more sophisticated, and creators figure out how to build more utility into their projects,” the spokesperson was quoted by Fortune as saying.
“We’re playing the long game because we see what’s possible, so we’re not that concerned about short-term volatility… We always expected frothiness, hype, and deflation as the community and use cases evolve, the tech gets more sophisticated, and creators figure out how to build more utility into their projects.”
OpenSea
The slowdown in NFT transactions on OpenSea comes amid warnings of a crypto winter in the second half of the year, with some analysts even forecasting the burst of the NFT bubble.
“The reality is that we have entered an unprecedented combination of crypto winter and broad macroeconomic instability, and we need to prepare the company for the possibility of a prolonged downturn,” Finzer wrote on Twitter in mid-July.
OpenSea, which achieved a $13.3 billion valuation after raising $300 million in its series C funding in January, laid off about 20% of its workforce in July as the company prepares for the worst, according to CEO Devin Finzer.
“The reality is that we have entered an unprecedented combination of crypto winter and broad macroeconomic instability, and we need to prepare the company for the possibility of a prolonged downturn,” Finzer wrote on Twitter in mid-July.
“The changes we’re making today put us in a position to maintain multiple years of runway under various crypto winter scenarios (5 years at the current volume), and give us high confidence that we will only have to go through this process once,” Finzer added.
OpenSea is currently positioned among the top NFT marketplaces. NFTs have been around since 2012, with the sale of a “colored coin” on the Bitcoin blockchain. Others, however, claim that NFTs only emerged in 2017 when Larva Labs launched collectible digital characters called CryptoPunks that were traded through blockchain.
But NFTs only went mainstream last year as they have become an avenue for trading art. Among the most talked-about NFT sales over the past year include the $69 million deal for a digital artwork by Mike Winkelmann, also known as Beeple, and the first tweet by Twitter founder Jack Dorsey, which sold for $2.9 million.
In the music industry, artists have also joined the NFT bandwagon after the COVID-19 pandemic upended the live music industry in 2020, prompting musicians to look for other revenue streams.
Justin Blau, aka musician and producer 3LAU, is one of the earliest adopters of NFTs in the music industry. He raised $11.6 million for his Ultraviolet collection of 33 different NFTs in February 2021.
Nashville’s Kings of Leon became the first band to release an album as an NFT in March 2021, dropping three types of tokens as part of a series called “NFT Yourself,” on the blockchain platform YellowHeart for their “When You See Yourself Album”.
Grimes raked in around $6 million in just 20 minutes after the Canadian singer sold 10 exclusive digital artworks on NFT marketplace Nifty Gateway in March 2021, while electronic DJ/producer Steve Aoki dropped his first NFT collection, Dream Catcher, during that same month, collecting $4.25 million.
But while some say that NFTs are the future of the music industry and of other forms of art, some are concerned that the bubble may soon burst.
These concerns escalated in recent weeks after the prices of blue chip assets like the Bored Ape Yacht Club plummeted alongside the drop in cryptocurrency prices. NFTs are priced in the native currency of the blockchain on which they were traded, making them susceptible to the slowdown in cryptocurrency prices.
Tyler and Cameron Winklevoss, CEO and president of cryptocurrency exchange Gemini, in a June blog post said the industry is now in a crypto winter.
“This is where we are now, in the contraction phase that is settling into a period of stasis… This has all been further compounded by the current macroeconomic and geopolitical turmoil,” they said.
OpenSea’s Finzer, however, remains bullish on NFTs’ potential. After laying off workers in July, Finzer said: “During this winter, I expect that we’ll see an explosion in innovation and utility across NFTs. With the hard (but important) changes we made today, we’re in an even better position to capture what will soon become the largest market on the planet.”Music Business Worldwide