Nine NFT Industry Analysis Bearish Sentiment Still Prevails

Continued Bearish Sentiment in NFT Industry Analysis Shows No Sign of Improvement

Author: [email protected]

In September, the famous mainstream media “Rolling Stone” published an article titled “Your NFTs Are Actually – Finally – Totally Worthless”, which caused widespread attention. The article claimed that “the valuation of 95% of once-hyped crypto assets has plummeted to the bottom”, making them “basically worthless”. Although this statement touched a nerve, the reality is more subtle, giving reasons to remain optimistic.

Although the NFT market experienced a sharp decline in September, it still achieved a trading volume of $370.9 million. We need to recognize that $370.9 million is not “worthless”, it still has some value. In this report, we will delve into the dynamics of blockchain networks, NFT trading markets, and investment activities in the NFT field. We will see hope from these aspects.

Key Overview

Crypto Market Overview

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• In September, the price of Bitcoin fluctuated slightly, ranging from a low of $25,158 to a high of $27,210 within the month.

NFT Market Overview

• In September, the NFT market diverged from the trend of Bitcoin and experienced a significant decline with a sharp drop in trading volume.

• The blue-chip index showed a downward trend in September, falling by 7.5% within the month.

Public Chains and NFT Trading Markets

• Ethereum’s trading volume was $364 million, a 30.3% decrease from August.

• In terms of trading volume, Blur’s dominant position is gradually weakening. LooksRare had a market share of 19.3% in September, showing an upward trend.

NFT Investment and Financing Situation

• In September, the NFT market continued to show a sluggish trend, with three rounds of financing totaling $27.14 million.

• Well-known crypto investment institutions such as A16z have shown signs of a “buying low” strategy, but have not yet invested in the NFT field.

Key Dynamics this Month

• Walmart will sell the toy series of NFT project Pudgy Penguins in 2,000 supermarkets across the United States.

• Starting from September 15th, Google allows advertisers to promote NFT games unrelated to gambling using its advertising services.

• Animoca Brands raised $20 million for its Mocaverse project.

• NFT art platform TRLab completed a $5 million seed funding round, led by Hivemind Capital and OKX Ventures.

• Casio will release 15,000 limited edition G-SHOCK NFTs on Polygon on September 23rd.

Cryptocurrency Market Overview

In September, the price of Bitcoin experienced minimal fluctuations, ranging between a low of $25,158 and a high of $27,210 within the month. The initial price at the beginning of the month was $25,940, with a slight increase of 3.7% throughout the month, ultimately closing at a price of $26,899.

Data source: BTC Price & ETH Price

Compared to the previous month, the value of Bitcoin and on-chain activities both experienced an increase in September. The increase in on-chain activities could be attributed to investors entering the market and preparing for the potential regulatory approval of a spot Bitcoin ETF. Progress was made regarding the spot Bitcoin ETF in late August.

Additionally, the trustee of the cryptocurrency exchange Mt Gox has announced a delay in repaying creditors until October 2024. They currently hold approximately 138,000 Bitcoins, valued at $3.7 billion, and this decision may reduce market selling pressure, positively impacting Bitcoin’s performance in September.

NFT Market Overview

In September, the NFT market showed a significant decline, contrary to the trend of Bitcoin, with the largest decrease in trading volume. The total trading volume for September was $370.9 million, a sharp drop of 30.6% compared to August. The number of transactions also decreased to 1,038,886, a decrease of 7.7%. The number of unique users decreased to 244,186, a reduction of approximately 22.5%.

Data source: NFT Market Overview

The recent market downturn has had a noticeable impact on market capitalization, which has fluctuated and shown a downward trend throughout the month.

Data source: NFT Market Cap & Volume

In September, the buyer/seller ratio in the NFT market was 103.0%, a decrease of 29.2% compared to August. There were a total of 14,832 buyers and 143,617 sellers throughout the month. It is worth noting that compared to the previous month, the number of buyers decreased by 30.6%, and the number of sellers decreased by 11.0%. These data indicate a slowdown in NFT market activity in September, with a decrease in participating buyers and sellers, and a prevailing bearish sentiment in the market.

Data source: Daily Buyers & Sellers

In September, the trend of daily unique users was similar to the trend of daily buyers/sellers. It is worth noting that from September 20th to 22nd, there was an increase in user participation, primarily due to the airdrop activities related to LianGuaindra: PixelProwler NFT on four different blockchains, with Polygon having the most prominent user participation.

Data Source: Daily Unique Users

The blue chip index showed a downward trend in September, with a decline of 7.5%.

Data Source: BlueChip Index

While the prices of some popular NFT series have seen significant declines, some projects are exploring opportunities beyond the NFT trading market to attract a wider audience in the real world. One way is to sell physical products through existing platforms.

An example is Pudgy Penguins, which recently launched the Pudgy Toys series in 2,000 Walmart stores across the United States. Each toy comes with a unique “birth certificate” that owners can use to apply for unique features for their digital “Everlasting Pudgy” characters in Pudgy World. This online virtual world runs on the zkSync Era chain, and users can scan QR codes to activate their digital characters. Pudgy Penguins effectively utilize social media and experiential marketing strategies to attract and retain audiences, setting themselves apart from other NFT brands struggling to maintain momentum.

Source: walmart.com

Public Chains and the NFT Trading Market

In September, Ethereum’s trading volume reached $364 million, accounting for 98.1% of the total NFT market trading volume. However, compared to August, Ethereum’s total trading volume decreased by 30.3%, reflecting a downward trend in the entire NFT market.

Data Source: Monthly Volume by Chain

Ethereum attracted a total of 135,600 unique users, an 8.1% decrease compared to August. Polygon also experienced a decrease in the number of unique users, totaling 93,700, with a decline of 30.5%. BNB had 31,700 unique users, a significant decrease of 42.2%. User engagement has been declining over the past few months.

Data Source: Monthly Unique Users by Chain

In terms of the NFT trading market, Blur’s dominant position in trading volume is gradually weakening. In September, its market share decreased from 48.9% to 47.0%. This downward trend started in June, when its share was 64.4%. On the other hand, LooksRare’s market share has been on the rise during the same period. Its market share increased from 8.9% in June to 19.3% in September. Meanwhile, OpenSea maintained a stable market share of 22.4% in September, slightly lower than August’s 23.2%. The NFT market landscape is changing, with Blur’s dominance weakening and LooksRare’s attractiveness increasing.

Data source: Monthly Volume by Marketplace – Distribution

In September, there was a decrease in overall user activity in the NFT market, resulting in a decrease in the number of users participating in most trading platforms. Despite this trend, OpenSea still dominates, attracting a huge user base of 189,600 independent users. However, this number has decreased by a significant 29.7% compared to August. On the other hand, Element’s user engagement shows a positive trend. In September, it had 41,300 independent users, a 13.7% increase compared to the previous month.

Data source: Monthly Unique Users by Marketplace

Throughout September, the NFT market continued to have heated discussions surrounding NFT royalties. Rarible announced its decision to stop aggregating orders from OpenSea, LooksRare, and X2Y2 after September 30. This move demonstrates Rarible’s support for royalties.

Source: Rarible X (Twitter)

The debate on royalties began in February 2022 when X2Y2 started charging creators 0% in royalties. Subsequently, platforms like Sudoswap, Magic Eden, and LooksRare adopted similar practices. OpenSea was initially a strong advocate for creator royalties, setting the fee at a maximum of 10%. However, in February of this year, under pressure from competitor Blur, OpenSea lowered the royalties. OpenSea recently decided to make royalties optional, adjusting the Operater Filter tool that previously enforced creator royalties to no longer be mandatory.

NFT Investment and Financing Situation

In September, the NFT market continued to show a sluggish trend with a total of three rounds of financing, amounting to $27.14 million.

Animoca Brands recently announced that they have secured a binding financing commitment of up to $20 million. This financing round aims to accelerate the development of Mocaverse. The round was led by CMCC Global, with participation from notable investors such as Kingsway Capital, Liberty City Ventures, and GameFi Ventures.

Source: Animoca Brands Website

Mocaverse is a dedicated membership NFT project for Animoca’s various companies, projects, investments, shareholders, and partners. Its main goal is to build Web3 native tools to empower games, culture, and entertainment products. Through Mocaverse, users can create their own digital identities, accumulate reputation, earn and use loyalty points, and leverage their digital identities to access the vast Mocaverse ecosystem. Animoca has a total of over 450 companies under its umbrella and investment portfolio, with more than 700 million potential users. Mocaverse will soon launch Moca ID, a series of non-transferable NFTs specifically designed to help users shape their on-chain identities and actively participate in the Mocaverse ecosystem.

NFT art platform TRLab announced the completion of a $5 million seed round, with Hivemind Capital LianGuairtners and OKX Ventures leading the investment, and HashKey Capital participating.

TRLab is dedicated to collaborating with artists, foundations, and art institutions to conceptualize, create, and launch art experiences, particularly providing high-quality digital art interactions for both established and emerging collectors. TRLab has already partnered with mainstream fashion magazine Vogue, Calder Foundation, Cai Guo-Qiang (contemporary artist), and Rhizome (a digital art organization affiliated with the New Museum in New York) to release multiple projects.

Source: Your Daytime Fireworks by Cai Guo-Qiang – TRLab

Although the cryptocurrency market has been bearish in September, well-known investment firms like a16z have shown signs of engaging in “buying the dip” strategies. It is noteworthy that from June to August 2023, a16z maintained relatively low investment activity, with only one investment per month. However, their recent recovery is evident as they made four investments in September. However, none of these investments were focused on the NFT market.

Final Thoughts

Mainstream media often pursues extreme narratives, focusing on absolute highs and lows to create attention-grabbing headlines. In the midst of this media frenzy, it is important to remember that those who are dedicated to creating and building NFTs continue their work behind the scenes, unaffected by market fluctuations.

When media outlets like “Rolling Stone” publish articles like this, people are saying, “Now is the time to buy.”

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The above research report includes:

Chains: Ethereum, Polygon, BNB Chain, Cronos, Optimism

Trading platforms: OpenSea, LooksRare, Blur, X2Y2, Cryptopunks, Rarible, SuperRare, Foundation, Decentraland, Aavegotchi, Element, Era7, the Sandbox, Minted

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