OpenSea Turns Into NFT Ghost-Town After Volume Downs 99% In 3 Months

A continuing debt issue at lending platform BendDAO raises the prospect of the NFT bubble imploding. As concerns about a potential market bubble mount, daily volumes on OpenSea, the world’s most significant nonfungible token (NFT) marketplace, have dropped significantly.

OpenSea Volume Plummets to Yearly Lows

Notably, the marketplace executed about $5 million in NFT transactions on August 28 — roughly 99% less than its record high of $405.75 million on May 1. The precipitous decreases in daily quantities coincided with equally sharp drops in OpenSea users and transactions, implying that the value and interest in blockchain-based collectibles have waned in recent months.

This is also reflected in the leading digital collectable projects’ lowering floor pricing — the minimal amount one is willing to pay for an NFT. For example, the floor price of the Bored Ape Yacht Club fell 53% to 72.5 ETH on August 28 from a peak of 153.7 ETH on May 1. Similarly, the floor price of CryptoPunks, another popular NFT collection, has fallen over 20% from its July peak of 83.72 ETH.

NFT Bubble is Bursting

NFT pricing is expressed in the currency of the blockchain on which they are launched. As a result, a digital collectable developed on Ethereum will be acquired using Ether (ETH), implying that NFT prices will decline if the market valuation of ETH falls. nA adverse ETH market looks to be one of the fundamental causes behind the dismal NFT statistics. Notably, the cost of one Ether has dropped from $4,950 in November 2021 to around $1,500 in August 2022.

BendDAO Votes to Improve NFT Liquidity

BendDAO, a decentralized autonomous organization that allows NFT owners to collateralize their digital collectibles for loans (in ETH) worth 30%-40% of the NFT’s floor price, voted last week to change the code of its protocol to make its NFT collateral more liquid. The vote took place after an increase in the value of ETH-denominated loans in dollar terms. Meanwhile, NFT prices have dropped, lowering the value of the collateral held by BendDAO.

As a result, BendDAO is currently experiencing its financial crisis, in which borrowers cannot repay their dollar-denominated loans owing to declining ETH values. Lenders are unable to reclaim their borrowed sums due to falling collateral valuations. BendDAO’s recent vote reduced the NFT liquidation threshold from 95% to 70%. To encourage more offers for its NFT collaterals, it has also lowered the period allowed for debtors to avoid liquidation from 48 hours to four hours.

In other words, if market liquidity continues to dwindle, the floor price of NFTs, including BAYC, risks falling much more.

Featured Image: Megapixl @Rafaelhenriquepress

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