May 2023 witnesses significant dip in NFT trading volume

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A recent report published by DappRadar reveals that the trading volume of NFTs in May has reached $333 million, indicating a potential decrease below $1 billion for the first time this year.

In contrast, there has been a notable surge in sales and the engagement of active wallets in NFT interactions every week, with 2.3 million transactions conducted this month.

Speaking to CoinDesk, DappRadar blockchain analyst Sara Gherghelas shared her observations regarding the NFT market. She anticipated that the number of NFT sales would either meet or exceed the figures observed in the previous month.

However, there is a noticeable decline in trading volume compared to the previous month. Gherghelas speculates that this could indicate an increased number of NFT traders involved in transactions with lower monetary values.

The report revealed a substantial growth of 27 percent in active wallets participating in NFT-related activities. It said the notable surge in popularity of the Miladys NFT collection, which Elon Musk endorsed, was the vital factor behind this growth.

Profits generated from the highly anticipated PEPE token also flowed back into the NFT market, further contributing to the rise in active wallets. As a result of this heightened on-chain activity, Ethereum gas fees experienced a sharp increase.

While Ethereum remains dominant in terms of trading volume within the NFT market, DappRadar reports that other blockchains, such as Solana and Polygon, are witnessing a more significant number of NFT sales. Specifically, 26.9 percent of NFT sales occur on Polygon, while Solana accounts for 13 percent.

Per the report, Ethereum’s dominance in terms of NFT sales diminishes significantly to only 5.7 percent. This number suggests that the blockchain is mainly used for facilitating high-value transactions, making it the preferred platform for the more affluent members of the NFT community.

DappRadar highlights a competitive battle between Blur and OpenSea for NFT marketplace dominance, with both platforms showcasing strengths in different areas.

Blur emerges as the frontrunner in trading volume, with an impressive $181 million in trades this month, driven mainly by the success of its Season 2 rewards campaign and the introduction of its lending protocol called Blend.

On the other hand, OpenSea maintains an advantage in the number of active NFT traders, indicating its continued stronghold among a broader and more mainstream audience.

Trading volume key to NFT success despite wash trading

According to Gherghelas, when evaluating success in the NFT market, trading volume continues to be a key metric, despite the possibility of manipulation through wash trading.

This manipulation is particularly prevalent among collectors seeking rewards on platforms such as Blur, emphasizing the need for careful consideration when interpreting trading volume figures.

She pointed out the instances of market manipulation witnessed on Blur, where people are using the platform for farming Blur tokens and engaging in airdrops.

In her opinion, Blur places less emphasis on the number of active traders on its platform. Instead, Blur specifically caters to a select group of professional traders with significant financial resources and extensive portfolios.

She added that the primary purpose of using Blur is to acquire high-priced NFTs. Similarly, Blur prioritizes attracting substantial investments and is less concerned with expanding its user base.

From her perspective, trading volume was vital in assessing the amount of money circulating within the NFT market. Gherghelas also explained that during bullish market phases, a significant trading volume indicates the influx of numerous participants and their enthusiasm. It presents an opportunity to generate substantial profits.

“Right now, if the trading volume is down but the sales count is up, this means that we have the same amount of traders, but their behavior has changed,” she said.


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