Despite the fact that the crypto market has been in a downtrend since early 2022, the NFT is still a thriving market. What made that difference?
While Bitcoin, Ethereum and many other top coins are rebounding today, the crypto market is still off to a bad start in 2022. Bitcoin has fallen 16% in the past two weeks, Ethereum has lost 20%, and Solana has lost 27% of its value over the same period. For some, it’s a possible sign of the coming crypto winter.
But many people probably won’t know that the market has entered a downtrend just looking at the NFT. NFT collections have grown in the past few weeks, with leading marketplace OpenSea seeing an Ethereum trading volume of $ 2.29 billion since early 2022. At this rate, January trading volume could break this mark.
Over the past year, as the NFT market expanded and matured rapidly, we often saw it partner with the crypto market. With crypto prices falling sharply last May and moving sideways over the summer, the momentum of NFT also appeared to be stagnating. And then when crypto prices recovered in late summer, the NFT market exploded completely.
For now, however, the NFT market has not only maintained the momentum that began in December, but has also set in a stronger upward momentum. While OpenSea does not reflect the entire NFT market and faces new competition including LooksRare, it bodes well for current trading activity and interest in the area.
Dragos Dunica, co-founder and chief data officer of blockchain analytics platform DappRadar, said he believes some owners are capitalizing on the popularity of top NFT collectibles for profit amid the downturn in the cryptocurrency market.
“NFT continues to perform well ‘despite’ falling crypto prices. Investors are getting excited about digital assets, and with NFTs maintaining an upward trend, this investment could result in a return that drives crypto prices higher. “
While some NFT collections have depreciated due to the ETH price drop, others have rallied. Popular NFT projects like Bored Ape Yacht Club and Doodles are showing strong growth. The ETH minimum price also rises significantly for both. Other NFTs in the market are holding up better too, rather than following the recent downtrend in the crypto market.
Dunica pointed to external factors that could cause the crypto market to collapse, including the Fed’s plan to hike interest rates, as well as violence and protests in Kazakhstan, the leading country for bitcoin mining.
On the flip side, while environmental complaints linger and backlash in the gaming community mounts, NFT is arguably more explosive than ever. DappRadar reports that the total NFT transaction volume for 2021 is $ 23 billion, up from $ 100 million in 2020. Meanwhile, the metaverse hype and celebrity interest is mounting in the blockchain gaming sector.
“All of these are signs that the NFT market is growing and rapidly approaching its peak, making it an attractive investment prospect regardless of current crypto prices.”
Lower volatility is the most obvious difference between the crypto market and the NFT, according to analysis firm Nansen.
Compare the ETH price with the Ethereum NFT volume | Source: Nansen
As the top NFT collections prove to be more powerful, this could be an opportunity for investors to convert crypto holdings into another more stable crypto asset class. It’s still a potential gamble as the NFT market, like the crypto market, has been notoriously volatile, but now, according to the report, some of the top collectibles act like a store of value, just as traditional works of art can do.
The current divergence between NFT trades and crypto prices can only be short-term. Nansen product manager Paul Harwood suggests that the price of Ethereum and the NFT market are bullish over the longer term.
“Recently, NFT sales have increased as the price of Ethereum has fallen. In this case, NFTs can perform better as they are designed to outperform cryptocurrencies. However, the value of Ethereum and activity in the NFT market remains bullish over the long term. “
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