CoinMarketCap Alexandria takes a look at how the NFT market — across marketplaces, collections and top projects — is faring amidst the ongoing bear market.
CoinMarketCap Alexandria had a look at the state of the NFT market in Q3, 2022 and analyzed:
- How much trading action has nosedived in the last quarter.
- Which blockchains the action is happening on.
- Which NFT sectors are hit especially badly.
- The fight for market dominance between different trading platforms.
- The current talking points in the NFT industry.
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Nft Trading Volume and Transactions in Q3 2022 — Down Bad
For the impatient, here's the TLDR:
Trading volume is down around 75%, but at least stabilizing at a low level. Transaction counts are looking stable.
Let's back this up with some numbers.
Any good news?
Yes. Sort of.
NFT Blockchain Dominance in Q3 2022 — Ethereum Remains Ahead (For Now)
Again, while the numbers differ, the pattern is clear. Ethereum is, for now, leaking market share to Solana.
NFT Sector Overview In Q3 2022 — Gaming Is the Best of the Bunch
- Digital art (collections like Art Blocks, Fidenza, Chromie Squiggles) is down 72% in trading volume quarter-on-quarter (from $215m to $59m).
- Fashion and luxury NFTs (like the much-hyped entry of Gucci and Burberry) did not live up to expectations — their already meager trading volume of $16m in Q2 plummeted to about $2m in Q3.
- Gaming is down as well, from $500m in Q2 (and $1.1b in Q1) to $72m in Q3, a 84% crash quarter-on-quarter.
- Still, while volume is gone, gaming NFTs remain more popular than art in terms of sales count (3m to 258k in Q3).
Unfortunately, there is no data available for median holding days since the average may be skewed by a few holders that never sell. Still, the top collections still have a decent chance of developing a sort of store of value attribute.
NFT Trading Platforms in Q3 2022 — OpenSea Facing a Challenge
However, according to The Block, X2Y2 overtook OpenSea as market leader in Q3.
NFT Industry Talking Points in Q3 2022 — Royalties or No Royalties?
Royalty fees are a fee that NFT creators get for recurring sales of their pieces.
While this has been one of the selling points for NFTs at the start, and its potential to change the way digital artists are compensated — it has now evolved to be a contentious subject in the space.
But one man's royalty is another man's opportunity to undercut the market, which is exactly what X2Y2 and Sudoswap did. X2Y2 gives traders the option not to pay any royalties; Sudoswap turned them off altogether. And in an illiquid market with highly-valued JPEGs, you as a trader have to take every advantage you can get.
While the strategy has paid off handsomely for the platforms, which are surging quickly in market share, no matter which statistic you choose to believe. But it is not good news for creators, who, in fact, make most of their money from royalties and not from the mint itself:
On the other hand, OpenSea and Magic Eden has seemingly committed to supporting royalties for creators:
- Skin in the game: creators could retain a share of their supply, similar to equity or a share of circulating token supply. Larva Labs actually did exactly that with Crypto Punks, holding 10% of the supply.
- Blacklisting: smart contracts that do not honor royalties could be blacklisted, though this strategy seems hardly enforceable in a free market.
- Tip jars: collections that build genuine connections with their community could be rewarded with tips, reinforcing the community web3 spirit (Kumbayah!).
- Harberger taxes: a somewhat-complicated model that would force NFTs to be constantly auctioned and owners to pay a tax on their holdings, which goes to creators.
So, when are we going back to the good old days?
It could be a while. But the NFT market seems to be consolidating together with the wider crypto market. Interestingly, trading volume and floor prices have dropped broadly in line with token prices. So for better or worse, NFTs are probably here to stay.
If you have some good ones, HODL!