Unveiling the August Landscape: NFT Market's Bear Market Bottom?

Author: stella@footprint.network

In August, the crypto market experienced notable fluctuations, with Bitcoin showcasing a wide range in value. Meanwhile, the NFT market witnessed a significant decline, raising questions about the future trajectory of this burgeoning sector.

Have we reached the bottom of the bear market? Maybe we could find some positive clues from the filing of five Ethereum ETF applications and the issuance of Hong Kong’s first crypto exchange licenses. However, bearish sentiment prevails in the NFT market, with a substantial decline observed in user activities and engagement.

In this report, we delve into the critical highlights of August, exploring the dynamics of chains, marketplaces, and funding in the NFT space. Despite the recent sluggishness in the market, we uncover a glimmer of hope as innovative NFT projects emerge, prioritizing the genuine benefits of creators and users, and capturing the attention and support.

Data for this report was obtained from Footprint Analytics’ NFT research page. An easy-to-use dashboard containing the most vital stats and metrics to understand the NFT industry, updated in real-time, you can find all the latest about trades, projects, fundings, and more by clicking here.

Key Points

Crypto Macro Overview

  • In August, Bitcoin experienced a wide range in value, fluctuating between a monthly low of $23,664 and a high of $30,057.

NFT Market Overview

  • In August, the NFT market experienced a substantial decline: trading volume decreased by 21.7%, transactions were down by 20.6%, and unique users declined by 27.4% compared to July.

  • The Blue Chip Index is in a downtrend, indicating a stronger bearish sentiment prevailing in the market.

Chains & Marketplaces for NFTs

  • Ethereum reclaimed its position ahead of Polygon in terms of unique user count, after trailing behind for three consecutive months.

  • Blur’s lead in trading volume kept narrowing, dropping from 52.5% to 48.3%.

NFT Investment & Funding

  • The NFT market maintained its sluggish pace, witnessing 5 funding rounds totaling $14.45 million in August.

  • Despite the recent sluggishness in the NFT investment and funding landscape, projects that embody innovation and prioritize the genuine benefits of creators and users continue to attract attention and garner support.

Hot Topics of the Month: Royalty Fees

  • OpenSea announced its decision to stop the mandatory collection of royalty fees by making them optional, starting in March 2024.

What’s New?

  • MasterExchange Raises $2.7 Million and Launches First Initial Music Offering

  • NFT Startup FirstMate Closes $3.75M Funding Round Led by Dragonfly Capital

  • OpenSea Unveils Standards For Redeemable NFTs

  • FingerprintsDAO Partnering With Larva Labs on Membership NFT Voxelglyph

  • Magic Eden Pledges $1M ‘Creator Fund’ to Bolster Polygon NFTs

  • Sotheby’s in the Firing Line in BAYC Collector Lawsuit

Crypto Macro Overview

In August, Bitcoin experienced a wide range in value, fluctuating between a monthly low of $23,664 and a high of $30,057. The month began with a brief spike to $30,000 USD on August 1. This spike was triggered by the filing of five Ether (ETH) futures exchange-traded fund (ETF) applications. The excitement was short-lived, however, as both BTC and ETH soon retreated, influenced by broader market weakness following the U.S. government’s credit rating downgrade.

Source: BTC Price & ETH Price

On August 8th, Bitcoin made another attempt to break through $30,000, possibly supported by the launch of PayPal’s new stablecoin, PayPal USD (PYUSD). Unfortunately, bitcoin experienced a sharp downturn shortly thereafter, falling to nearly $25,000 USD. This decline was driven by a number of negative events, including reports of significant BTC sales by SpaceX, the Evergrande crisis in China, and a massive $1 billion liquidation in the crypto derivatives market in a single day.

However, before the end of August, a U.S. appeals court ruled in favor of Grayscale in its lawsuit against the SEC, causing the price of Bitcoin to spike from $26,000 to over $28,000, but eventually stabilizing around $26,000.

NFT Market Overview

August witnessed a significant decline in the NFT market, with the trading volume totaling $527.0 million, down 21.7% from July. The number of transactions also decreased, reaching 1,119,066, down 20.6%. In addition, the number of unique users in August was 313,610, a decrease of approximately 27.4%.

Source: NFT Market Overview

The recent market violation has had a noticeable impact on the market cap and trading volume. The Blue Chip Index is in a downtrend, indicating a stronger bearish sentiment prevailing in the market.

The floor price of the second-ranked blue-chip NFT, Bored Ape Yacht Club (BAYC), has been steadily declining since January 2023. In August, it dropped below 23 ETH, indicating a continuing bear market and the need for more time to recover.

Source: NFT Market Cap & Volume

Source: BlueChip Index

The figures point to a sustained deceleration in the NFT market, indicating a notable change in user engagement and investment activity. Like the broader crypto-macro market, the NFT market is presently marked by diminished confidence and an inclination toward risk aversion.

In August, the NFT market witnessed a buyer/seller ratio of 131.63%, down 17.5% from July. The month recorded 211,696 buyers and 160,822 sellers. Notably, buyer numbers decreased by 29.4% while sellers saw a decline of 20.1% compared to the previous month. Throughout the current month, the figures for daily buyers and sellers remained relatively stable, with the exception of a notable surge in buyers on August 3.

Source: Daily Buyers & Sellers

StarPass on Polygon accounted for the largest percentage of buyers on that specific day. According to PolygoScan, the largest holder of the NFT items, who possesses 62.7% of them, engaged in frequent trades with low or nearly zero prices and loyalties on August 3. However, concerning transparency, the project’s details are limited.

Source: NFT Buyer & Seller

The daily unique users experienced a similar trend as that of daily buyers and sellers, which are positively correlated.

Source: Daily Unique Users

Chains & Marketplaces for NFTs

In August, Ethereum continued to maintain its dominance in the NFT market, representing a substantial 97.8% of the total trading volume. However, the overall volume on Ethereum experienced a decline of 21.9% from July, amounting to $515.2 million, reflecting the downward trend observed across the entire NFT market.

Source: Monthly Volume by Chain

The number of unique users on Ethereum amounted to 147.14K, marking a decrease of 10.7% compared to July. Notably, Ethereum reclaimed its position ahead of Polygon in terms of unique user count, after trailing behind for three consecutive months.

Source: Monthly Unique Users by Chain

When it comes to NFT marketplaces, Blur’s lead in trading volume kept narrowing, dropping from 52.5% to 48.3%. Conversely, LooksRare observed an upward trend during the same period, with its market share increasing from 11.3% to 14.7%.

Source: Monthly Volume by Marketplace — Distribution

OpenSea maintained its position as the leading player in terms of unique users, boasting a significant user base of 268.3K. However, the overall user activities witnessed a decline, resulting in a decrease in the number of users engaging with the platform.

Source: Monthly Unique Users by Marketplace

As the NFT market undergoes a period of adjustment, it presents a valuable opportunity for the industry to explore deeper innovation and upgrade its offerings.

OpenSea is actively working towards standardizing redeemable NFTs across the industry. On August 28, OpenSea announced the release of its open standard and roadmap for redeemable NFTs through a blog post. Redeemable NFTs possess inherent value or utility that can be “redeemed” to obtain another item, whether it exists on-chain or off-chain. These tokens empower creators to cultivate stronger connections with their communities, fostering more immersive membership experiences and unlocking new applications of Web3 technology. Notable examples of redeemable NFTs include GutterMelo by PUMA x Gutter Cat Gang, the Invisible Friends Physical Collectibles, and Creature World’s Crowd Phase 3. Traditionally, the process of acquiring new items through redeemables involved burning the original NFT. However, OpenSea’s groundbreaking standard and user experience transcend this conventional approach by introducing trait redemption.

Source: Invisible Friends — OpenSea

Redeemable NFTs are one of the most exciting use cases of NFT technology, but they lack a standard. OpenSea has released four improvement proposals (ERC-7496, ERC-7498, SIP-14, and SIP-15) and is actively seeking community feedback and collaborators for future projects.

NFT Investment & Funding

In August, similar to the previous month, the NFT market maintained its sluggish pace, witnessing 5 funding rounds totaling $14.45 million.

Music investment marketplace MasterExchange has raised a $2.7 million initial funding round from investors including Hong Kong-based venture capitalist Vectr Fintech and Pan Capital CEO Claes-Henrik Julander.

MasterExchange offers the Initial Music Offering (IMO) system, akin to an Initial Public Offering (IPO), which notifies investors of available song investment opportunities. Any master royalty beneficiary, including artists and music labels, can launch an IMO on the MasterExchange platform. Investors who acquire shares of song royalties gain access to income generated from song usage, such as streaming or commercial features. MasterExchange prioritizes transparency by providing comprehensive information on investment prospects for each song, empowering users to make informed decisions.

Source: MasterExchange Website

This innovation enables music enthusiasts to discover novel and captivating avenues to engage with their beloved music through the use of NFTs. It provides creators with the chance to sell a portion of their future revenue, thereby fueling artistic endeavors.

The NFT drop platform on Solana, DRiP, raised a $3 million seed round to accelerate the growth of collectible content and Web3 social platforms. DRiP enables creators to send digital gifts to supporters every week. DRiP’s signature drop is Showcase. Showcase is a free art drop, curated by the DRiP team, that highlights the work of artists, animators, musicians, and other creators on Solana. Previous pieces include Solana Spaceman by bunjil, RIVALS by Flag Monkez, The UP Only Cet by Peblo, and Metropolis by Daramola.

Source: DRiP Website

FirstMate, a startup dedicated to empowering NFT creators with digital storefronts, has successfully raised $3.75 million in a funding round. The round was led by Dragonfly Capital, with participation from Coinbase Ventures and NextView. Unlike traditional marketplaces, FirstMate prioritizes the needs of creators by offering a unified platform where artists can showcase all their works, regardless of their origin. Additionally, FirstMate grants artists complete authority over their royalties, ensuring they have full control over their creative endeavors.

Source: FirstMate Website

Despite the recent sluggishness in the NFT investment and funding landscape, projects that embody innovation and prioritize the genuine benefits of creators and users continue to attract attention and garner support. While the overall market may have experienced a slowdown, there are still noteworthy initiatives that stand out amidst the challenges. These projects not only bring novel ideas to the table but also remain steadfast in their commitment to empowering creators and delivering value to users. As the market adjusts and evolves, these innovative endeavors serve as beacons of inspiration, demonstrating that with the right approach and dedication, opportunities for growth and success can still be found within the realm of NFTs.

Hot Topics of the Month: Royalty Fees

On August 18, OpenSea announced its decision to stop the mandatory collection of royalty fees by making them optional, starting in March 2024. This decision highlights a shift in the market, as key marketplaces no longer require mandatory royalties. For instance, marketplaces like Blur and LooksRare have already adopted optional royalty models, while SudoSwap has implemented a zero-royalty strategy.

Source: OpenSea Twitter

OpenSea’s recent decision to make royalty fees optional has sparked a range of reactions. Supporters of the move see it as a significant step towards finding a balanced approach that benefits both creators and buyers, while accommodating the diverse needs and preferences of participants in the NFT ecosystem. On the other hand, Yuga Labs responded to OpenSea’s decision by announcing that they would block the ability to trade their newer NFTs on the platform.

This announcement from OpenSea has sent shockwaves through the NFT community, igniting discussions about its potential impact on creators and the NFT ecosystem as a whole. As the NFT market continues to evolve, striking the right balance between attracting sellers, ensuring fair compensation for creators, and maintaining a competitive edge will be a delicate task.

Data includes:

  • Blockchains: Ethereum, Polygon, BNB Chain, Cronos, Optimism

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

This piece is contributed by the Footprint Analytics community.

The Footprint Community is a place where data and crypto enthusiasts worldwide help each other understand and gain insights about Web3, the metaverse, DeFi, GameFi, or any other area of the fledgling world of blockchain. Here you’ll find active, diverse voices supporting each other and driving the community forward.

Footprint Analytics Website: https://www.footprint.network

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