The trading value of “blue chip” NFT collections such as CryptoPunks and Bored Ape Yacht Club has dropped below $100,000 worth of ETH over the last seven days after several months of high prices.
As a result of this significant downturn in the NFT market, there has been a two-year low in trading activity for the broader NFT market. According to Dune Analytics, the NFT market experienced a decline in daily trades of 71 percent since mid-April.
NFT trades have been consistently dropping across multiple platforms, and this decline has been gradual. The decrease in activity is significant, as last Thursday only recorded around 20,000 NFT trades, the lowest number seen since the end of 2021.
NFT Price Floor reported that the current cost to purchase a CryptoPunk NFT is 48 ETH, equivalent to $88,763 at the time of writing.
The cost of acquiring a CryptoPunk is still high, but it had dropped over 30 percent from just a month ago when the least expensive CryptoPunk on the market was priced at slightly over $128,000 worth of ETH.
there's been an incredible drop off in unique NFT buyers/sellers in the last week
less than 10k wallets now on all platforms
— Giancarlo (@GiancarloChaux) April 20, 2023
Blur comes in sweeping NFT marketplace competition
Since Ethereum’s price has remained steady at around $1,870, experts attributed the recent decline in NFT trading activity to the new NFT trading platform Blur.
This decline is noteworthy because Blur has influenced positive sentiment about the market’s longevity. It has become the top NFT marketplace, overtaking OpenSea in late February.
The NFT market saw impressive growth in February and March, with a total monthly trading volume of around $2 billion. Experts, however, are concerned that a significant portion of this growth is due to Blur’s manipulation of “wash trading.”
The accusation is not without reason. Blur’s rise to the top of the NFT marketplace was fueled by a rewards program that incentivized traders to leave other platforms and frequently flip NFTs.
Blur remains the dominant player in the NFT market, with over 60 percent of all NFT trading volume recently.
On the other hand, some people have suggested that recent spikes in gas fees, which may have been caused by the rise of meme coins like PEPE last week, could explain the trend.
Analytics firm SeaLaunch identified various macro factors in a Twitter thread on Thursday that may have played a role, ranging from high gas fees to traders experiencing liquidity issues related to the U.S. tax deadline.
— sealaunch.xyz (@SeaLaunch_) April 20, 2023
Some people also interpret the disappointing numbers as a sign that the crypto and NFT bears’ anticipated “bottom” has finally been reached.
Falling correlation of BTC, ETH
Coinbase Institutional’s latest research report titled “Lower BTC vs ETH correlation” reveals that there has been a decline in the correlation between BTC and ETH returns since the end of March.
This decline was more noticeable after the Shanghai fork and is similar to what was observed during the Merge in September 2022. The report also demonstrates that the correlation coefficient between daily BTC and ETH returns has fallen from 0.95 to 0.82. This is below the 12-month average of 0.90 and the low in January of 0.85.
The report shows a decreasing correlation between BTC and ETH could affect quantitative strategies. But it supports diversification arguments for holding both BTC and ETH. This period of low correlation has lasted for about 30 days and may continue for another two weeks due to ongoing ETH withdrawals.