NFT mania shows signs of cooling as average price and sales decline

Many NFT marketplaces have experienced trading volume declines. PHOTO: REUTERS

PORTLAND, Oregon (BLOOMBERG) - While anecdotal evidence abounds that the market for non-fungible tokens (NFTs) is beginning to cool, there are no bigger red flags that what is going on with sales and prices.

The average selling price of a non-fungible token has declined to under US$2,000 (S$2,700), compared with an all-time high of almost US$6,900 on Jan 2, according to industry data tracker NonFungible. The daily total sales average was about US$26.2 million on March 3, the data shows. The tally was US$160.2 million on Jan 31.

Since Feb 24, when Russia attacked Ukraine, the average selling price has dropped by about 30 per cent.

NFTs - most often digital art such as cartoonish-looking apes and penguins - saw their daily average price last year go from US$128 to nearly US$4,000, according to NonFungible. OpenSea, the biggest NFT marketplace, recorded its best month ever in January.

Since then, prices have steadily retreated as concern about an easing of pandemic era stimulus and geopolitical tensions weighed on the entire crypto market. The decline has only accelerated since Russia invaded Ukraine.

"What I would say is the last week or so has seen a significant decline - perhaps as much as 40 per cent - in floor prices for the most desirable NFTs," said Mr Aaron Brown, a crypto investor who writes for Bloomberg Opinion.

Another possible contributor to the decline is the likelihood of increased regulation. The United States' Securities and Exchange Commission is scrutinising creators of NFTs and the marketplaces where they trade to determine if some of the assets run afoul of the agency's rules, Bloomberg reported on Wednesday (March 2).

Sales of some of the most popular brands are falling fast. NBA Top Shot's are down 26 per cent in the past week, while Axie Infinity's are down 15 per cent, according to data tracker DappRadar. While those flagship NFT sales are off, the decline is not across the board. Sales of Bored Ape Yacht Club NFTs are up 59 per cent in the past seven days, while CryptoPunk sales are up 118 per cent, DappRadar data shows.

Many NFT marketplaces have experienced trading volume declines. OpenSea's trading volume is down 30 per cent in the last seven days, according to DappRadar. Rival platform LooksRare's volume is down 16 per cent. Even popular game Axie Infinity's volume is down 21 per cent.

"Trading volumes are down in general, but the demand measured by the number of unique traders and sales count is increasing," said Mr Pedro Herrera, senior data analyst at DappRadar. "So while we're seeing less volume, there's more activity, even though Ukraine's conflict is definitely driving away the attention from trading."

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