Why NFT is immune from the chill winds of the crypto market

Why is NFT resilient?

原文作者： Pedro Herrera

原文编译： Moni， Odaily 星球日报

In recent weeks, a series of macroeconomic events have roiled the crypto market and served as a reminder of the potential risks and volatility inherent in the nascent industry, such as:

1. Controversy over bitcoin mining in Kazakhstan;

2. A new round of COVID-19 outbreak;

3. Expectations for fed rate hikes;

Unstable market situation in Ukraine.

All of these reasons seem to be a drag on the capital markets, and have contributed to the crypto market's periodic decline.

Due to the degree of correlation cryptocurrencies have with traditional markets, the impact has also been felt strongly in the blockchain space, where bitcoin and Ethereum have now halved in price since hitting record highs in November 2021, BNB, ADA, SOL, AVAX, SAND, MANA, GALA, and several other cryptocurrencies that have historically performed well are not immune. During that time, the total cryptocurrency market cap has shrunk from $2.9 trillion to $1.6 trillion.  

Source: DappRadar

There is no doubt that the current crypto market sentiment panic, everywhere facing challenges. In the blockchain market, however, it is a different story in one particular vertical: NFT.

Understand NFT macroeconomics

While a series of events has held back the crypto market, the following factors have had a positive impact on the future development of NFT at a macroeconomic level.

First, celebrities and brands are increasingly involved in the NFT space. Soccer star Neymar Jr. (who has more than 200 million followers on Twitter and Instagram) and actor Kevin Hart (who has more than 1.92 on Twitter and Instagram) have a broad social reach They recently announced that they have acquired Bored Ape Yacht Club (BAYC), one of the first NFT projects in the crypto market.

Meanwhile, Twitter, the most popular social media platform for cryptocurrencies and NFT enthusiasts, has launched its first Web 3 feature to expand its reach. Next, social media platforms Instagram and &NBsp; Facebook  A similar feature will follow. Meanwhile, even retail giant Wal-Mart has jumped on the bandwagon, filing several trademarks for NFT use cases.

Source: DappRadar

NFT assets are definitely more popular than ever at this stage. The numbers don't lie: Google searches for the word "NFT" recently surpassed those for "Crypto" for the first time, and a growing number of NFT enthusiasts from Asia are taking over a market once dominated by Users in North America and Europe.

NFT on-chain indicators tell a bull story

NFT was a dark horse in the blockchain industry last year and did quite well. In 2021 alone, the NFT market completed a total of $25 billion in transactions, 18,414% more than the previous four years combined.

While cryptocurrencies are in hot water, NFT seems to be unscathed and thriving. Next, let's narrow down the analysis and focus on Ethereum. NFT on Ethereum is also showing very positive trends: it accounted for 75% of transactions last year; The number of NFT sales and users on Ethereum continues to grow; Unique Active Wallet (UAW) is connected to the collectibles decentralized market NFT Dapps. On average, more than 53,300 unique active wallets have been connected to Ethereum NFT Dapps every day since December 2021, which is 43% higher than the third quarter of last year.

Source: DappRadar

Despite the underperformance of cryptocurrencies, on-chain metrics are climbing, driven by positive macroeconomic events and the central role NFT plays in the play-to-earn and metasexes. Building a decentralized and interoperable metasexes is absolutely good for the development of the NFT market.

Source: DappRadar

In addition, with the value of cryptocurrencies, the underlying asset that underpins NFT, falling, people may see this as a great opportunity to buy cryptocurrencies. Even though 2022 has just started, there are more independent traders than ever before -- a record 1.6 million. Driven by these independent traders, Ethereum NFT generated over $3.7 billion in transactions, and that doesn't include transactions on LooksRare, which is on track to break the previous record of $4.5 billion set in August 2021.

Source: DappRadar

The list of on-chain indicators mentioned above reflects the market's acceptance of the new asset class and positive sentiment. Not only that, there is another indicator that can clearly reflect the market's pursuit of NFT assets - floor prices.

Floor price analysis

Floor Price is one of the most important indicators for evaluating NFT collectibles, especially from an investor's point of view. The floor price of the NFT collection is the minimum asking price for the collection and represents the lowest barrier to entry.

Recently, we analyzed the floor prices of some important Ethereum collectibles, and the results showed that NFT is more like a store of value asset, and importantly, this category has outperformed cryptocurrencies and even some traditional assets such as gold and the S&P 500.

Source: DappRadar

As you can see, the overall value of the NFT space is steadily increasing. By analyzing the floor values of the top 100 NFT collectibles, we found that NFT is now worth approximately $14.8 billion, down $2.4 billion from November. Although in the meantime, ETH  Prices have been hit hard, down 50%, but the most traded NFT collectibles have not fallen more than 15%, reflecting the resilience of NFT assets.

BAYC is one of the NFT collectibles that has had a direct positive impact on NFT. BAYC's floor price fluctuated around 30 ETH in early November when bitcoin and ETH reached all-time highs. A week later, even though the price of ETH had dropped by 15%, BAYC's floor price had risen by more than 60% to over 50 ETH. By the end of 2021, the cheapest BAYC price has reached 60 ETH and most have exceeded 90 ETH. That means getting the cheapest BAYC would have to cost more than $225,000 at current ETH prices.

Source: DappRadar

While the high-profile cryptocurrency has lost about half of its market value in the past two months, BAYC is up 207% (measured in ETH) and 14% (measured in US dollars) since November 10. In other words, if you held BAYC from November 10 to today, you would have gained 14% of your money, while those who held any cryptocurrency would have lost 50% of their money. BAYC has clearly become a store of value asset.    

Source: DappRadar

However, BAYC is not the only head NFT on the rise. Since November 10, another Ethereum avatar, NFT -- World of Women, has risen 383% (as measured by ETH) and real prices have risen 185% over the same period. In addition, CyberKongz and voxel (VX) flooring prices have actually risen 27% and 68%, respectively, since December. So is Doodles, whose floor price has risen 224 per cent since November.

Source: DappRadar

CryptoPunks, as the most "chronological" NFT collectibles, are tricky to analyze. While this series of NFT did not perform as well as the other series mentioned above, it has to be said that CryptoPunks still outperformed several other crypto assets. The Cryptopunks floor price hit 100 ETH on November 2nd and fell to 83 ETH a week later, the same day bitcoin and ETH hit record highs. Since that day, however, the floor price of CryptoPunks has dropped by 9.6% (measured in ETH), but the actual price has only shrunk from $254,000 to $229,000. Thus, CryptoPunks is also quite resistant.

Source: DappRadar

While the value of avatar NFT has risen dramatically, so has virtual world and game-related NFT. Forgotten Rune Wizards is a typical example, with its floor price rising 210% (measured in ETH) since November 10, making it 132% higher in real terms than in December. Similarly, Gala Games VOX NFT has seen a 145% increase in floor prices (as measured by ETH) since November.

Source: DappRadar

On the other hand, NFT, the underlying architecture of the virtual world, has benefited greatly from the hype of the metasverse and has rapidly increased in value. For example, The Sandbox  And & have spent Decentraland  The floor value of the virtual land in China has remained high since Facebook announced the name change (although the actual value in dollar terms has declined). Meanwhile, floor prices for virtual apartments in Worldwide Webb have risen 242% (measured in ETH) since November, despite the downward trend in cryptocurrencies. Cryptovoxels  Virtual plots in China were 17% higher than in November (as measured by ETH).

Source: DappRadar

We believe that analyzing the floor price of collectibles can provide an insight into the stability of the project from an investment perspective. Recent analysis confirms that some NFTS have held their ground while the overall market has shown a downward trend. Why does this happen? Why is NFT so resistant to the fall in cryptocurrency prices?

Why is NFT so resilient?

There is no easy answer to that question. To be sure, however, NFT has attracted rational investors under the influence of certain factors.

There is an argument that some NFTS should be treated as cultural works rather than digital assets. But like some works of art, those NFTS are seen by some as genuine investment value. Like crypto digital artist Beeple's "The First 5000 Days," which sold for $69 million through Jasz, this piece brought heterogeneous tokens to The world. In addition, collections of generative art such as Fidenza, Ringers, and Autoglyphs are emerging as new forms of expression and are valued in the thousands of dollars.

Source: DappRadar

Meanwhile, NFT like BAYC and CryptoPunks have gradually become the mainstream of the market. On August 23, 2021, VISA announced the purchase of CryptoPunk #7610 for $150,000, further solidifying CryptoPunks' position as a hedge. In addition, 101 works from the BAYC NFT series sold for $24 million at Sotheby's.

Although only a few collectibles can compare to these two types of NFT, it is believed that in the near future, NFT will become a major player in the fields of music, ticketing, sports and fashion. All in all, great expectations have been placed on NFT, but only time will tell if NFT will have a cultural impact that transcends generations.

practical

One of the most important features of a successful NFT project is that it grants rewards to its community members: holders can gain added value or utility by holding the NFT of these projects.

For example, CryptoPunks holders later received free Meebit from the Larva Labs team, increasing the actual return on their initial investment. So are Cool Cats (up 150% in ETH price since November 10th), The Meta Key (up 370%), Doodles and BAYC.

而实用性则可以在产生收益的 NFT 中体现出来，如每天都会发放原生实用Token的项目： CyberKongz 及其 BANANA Token 。Genesis Kongz 持有者每天都会收到十个 BANANA Token ，每个价值 24 美元。此外，在 SupDucks (35%) 和 VOLT Token 以及 Cool Cats 和他们的 MILK Token 中也存在着类似情况。

BANANA practical framework, above source: CyberKongz 

此外，NFT 还融入进了 DeFi 和游戏等其他类别的项目中。其中，DeFi 与 NFT 进行融合的典型例子就是像 NFTfi 这样的平台，用户可以在此类平台上使用 NFT 作为抵押品。而在像 Pixel Vault 这样的项目中，MetaHero Universe (57%) 中的 NFT 可以被质押来，也可以对基于工作量证明（PoW）共识机制的 Token 进行「挖矿」。

Of course, NFT can also be incorporated into games and become an essential element of the game. You'll find Mirandus NFT and Aurory Villagers holding floor values in spite of big price drops in ETH, SOL, GALA, and AURY. We've also looked at Forgotten Rune Wizards, another NFT collection that incorporates the game's utilitarian mechanics, and its floor value has also been well developed. While it is challenging to maintain the floor value of the myriad game alternatives, it is safe to say that the demand for blockchain games is on the rise, adding value to essentially all of these types of NFT.

Celebrity star power and NFT

A related trend that has had a positive impact on NFT is the involvement of celebrities, celebrities and well-known brands, The NFT program gained prominence with the participation of such celebrities as NFL superstar Dez Bryant, NBA star Stephen Curry, Post Malone, Snoop Dogg and Eminem. Later, with the arrival of more entertainers such as Jimmy Fallon, Paris Hilton, Neymar and Kevin Hart, the BAYC community became even more unique.

The positive influence of celebrities is also seen in another NFT project: World of Women, which saw floor prices rise 250% hours after Eva Longoria announced its purchase, and Doodles are another project benefiting from famous NFT characters such as Pranksy, Loopify and Steve Aoki.

Above: Celebrity NFT, credit: DappRadar

Similarly, the influence of traditional conglomerates has been significant, with Adidas, Coca-Cola, Pepsi, Budweiser and several others either launching their collections or partnering with important NFT teams to establish a presence in the field. Fashion giants Gucci, Dolce & Amp; So do Gabbana, Burberry and other companies exploring the metasverse.

NFT Project Team is transforming to build a "brand"

The team behind the NFT collection is highly responsible for the fate of its projects. Some teams have found that having talented artists and experienced developers grow up with NFT projects is also a recipe for success. Once the team is successful, they can become a truly influential brand in the space.

Source: RTFKT

A good example is RTFKT, the creative team behind Clone-X, working with Jeff Staple and Fewocious to develop unique NFT titles. In the end, the digital design and fashion brand has relied on this business model to deliver the desired results and to cope with any challenges appropriately. Today, RTFKT is one of the most influential brands in the Web 3 space and was acquired by Nike for an undisclosed sum in December.

Scarce assets

Finally, let's talk about the scarcity factor in the NFT space.

In fact, scarcity matters because it is directly related to the human psyche, the anxiety of missing out on something, also known as FOMO, which is linked to scarce assets and investment markets, and NFT combines the two.

Most collectibles will launch a limited number of NFTS that will be stored on the blockchain forever. Whether 10,000 copies of NFT or 20,000 copies of NFT, the limited supply of a particular edition will always remain the same. That's the beauty of blockchain.

The upshot is that NFT has become an asset class in its own right. While the correlation with cryptocurrencies remains due to the nature of the technology, NFT is slowly creating for itself an economy whose macro events and market factors have a positive or negative impact on the sector.

The latest wave of NFT adoption is driven by a combination of cultural values, added utility, celebrity involvement, brand awareness, and the scarcity of these assets.

Frankly, we may only be seeing the tip of the NFT iceberg. Projects such as Larva Labs, BAYC, Cool Cats, RTFKT, CyberKongz and Doodles will continue to be heavily involved in the meta-universe narrative. As more and more products come out with better user experience, we'll see more non-encrypted users get involved in this space, for example, it's said. Coinbase  The NFT market is expected to integrate mastercard payments, and there will certainly be many potential use cases for embedding NFT into traditional business models.

It is not clear how long the current bearish trend in the cryptocurrency market will last, maybe two weeks, maybe two years. However, in the current market environment, the real value of NFT has not been affected, and continues to increase. NFT has certainly proven itself to be a digital asset capable of storing value.

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