The NFT market experiences a decline in investor interest as initial excitement fades, raising doubts about its trajectory. High-profile projects struggle to maintain momentum, leading to industry-wide concerns and uncertainty.
New protocols like Bitcoin Ordinals and the fierce competition amongst well-known NFT marketplaces like Blur, OpenSea, and Magic Eden earlier this year aroused increased interest in NFTs, heralding a possible rebound from the losses it suffered in the 2022 bear market.
Investor interest is once again dwindling as the initial excitement fades, casting a shadow over the business. High-profile NFT projects now confront a formidable task to retain their momentum as they slowly spiral into their demise, causing tremors throughout the industry and raising questions about the trajectory of the market.
NFTs Struggle to Survive
The crypto market may be showing signs of improvement, and investors are becoming more optimistic about a possibly bullish summer, but the NFT market is having trouble surviving. Many investors are losing billions of dollars as a result of the sharp decline in blue-chip NFT collections, which were once praised for their high price tags.
The NFT market had the “worst liquidation cascade in history” during the last three days, according to a new analysis by Cirrus. Due to a sharp drop in NFT floor pricing, over 1200 blue-chip NFTs, including Beanz, BAYC, and other securities utilized as loan collateral, have been liquidated. A NFT analysis website called Snow Genesis has recently issued a warning that hundreds more NFTs are still in danger of liquidation.
Beanz was one of the projects most severely impacted, registering over 600 liquidations, or 3% of their total supply, which serves as a sobering reminder of the severity of the liquidation event and its effects.
Although the situation is difficult, there is some hope because the rate of liquidations has noticeably slowed down in the last several hours. While some investors have posted their NFTs for auction, many have been successful in paying off their loans. Even while there are still comparatively few underwater loans, the NFT market has not yet recovered to allay persistent worries.
NFT Floor Price Reduction
Despite the general rising trend in the larger crypto market over the past week, many significant NFT collections have experienced significant losses in their floor price. Bored Ape Yacht Club (BAYC), a leading NFT collection, just saw a steep decline below 30 ETH, marking its lowest position since October 2021. At the time of publication, it had managed to modestly recover and was maintaining a floor price of 31.5 ETH.
Other well-known NFT collections, such as Azuki, were also adversely impacted, with its floor price falling by more than 20%. The community is becoming increasingly incensed, and many are even considering taking the creators to court for launching the “dilutive NFT project.” During this time, large losses have also been reported for projects like Pudgy Pigeons, BAKC, and Moonbirds.
On the other hand:
- As compared to February, NFT thefts have also decreased by more than 80% in June.
- Many users believed NFT lending protocols may greatly raise the danger of loan default or, worse yet, trigger a crisis like the subprime mortgage crisis of 2007.
This liquidation incident shows that, despite the crypto market’s recovery from a significant capitulation event, the NFT market is still vulnerable, volatile, and fraught with difficulties. How these collections will recover and if they can win back investor trust are still up in the air.