The Rise and Fall of the Market in May

However, the amount raised outpaced actual market volume and user growth, suggesting that enthusiasm remains concentrated among venture investors. Mainstream collectors have yet to match the interest. Unique users and trading volume continue to decline.

The market needs to move beyond temporary hype and speculation and attract broader participation and success across projects.

Data of this report was obtained from Footprint’s NFT research page. An easy-to-use dashboard containing the most vital stats and metrics to understand the NFT industry, updated in real-time, you can find all the latest about trades, projects, fundings, and more by clicking here.

Key Points

Crypto Macro Overview

NFT Market Overview

• The NFT market currently has a market capitalization of about $20 billion, with approximately 30,000 unique users interacting with the market on a daily basis.
• The number of users in the NFT market is not increasing a lot while Milady Maker’s getting hot mentioned by Elon Musk.

Chains & Marketplaces for NFTs

• Ethereum dominates NFT volume with over 95% of the total market.
• However, in terms of unique active wallets, about 40% are on Ethereum, 34% on Polygon and 16% on Solana.
• Over 70% of wash-trading takes place on x2y2, indicating that their systems and policies allow manipulative behaviour with fewer barriers.

NFT Investment & Funding

• The total amount raised in May was $43.2 million, the highest since November 2022.
• However, there were only 7 funding rounds, which is a relatively low number.

Hot Topics of the Month: Bitcoin Ordinals

• Ordinals are a unique category of NFTs that are based on the Bitcoin network.
• People still expect the future and further expansion of the Bitcoin network.

What’s new in this month?

• OKX Wallet Becomes First Multi-Chain Platform to Enable Viewing and Transfer of Bitcoin Ordinals.
• Adidas and Pharrell Release Digital Clothing for Doodles NFT Holders.
• NFT Marketplace Blur Launches Blend, a Peer-to-Peer Lending Platform.
• Elon Musk Sends Milady NFTs Soaring.
• Binance Adds Support for Bitcoin Ordinals to Its NFT Marketplace.
• Sony Launches Web3 Incubator Program.

BTC opened the month of May at $28,074, peaked on May 5 at $29,528, and turned down to $27,223 on May 31. For the month as a whole, bitcoin was down slightly by 0.5%.

However, BTC as a marketing indicator, is still up more than 64% year-to-date, compared to its price of $16,605 on Jan. 1. ETH is following the same trend, down less than 1% in May, and up 58% year-to-date in 2022.

Market players shouldn’t have a false feeling of security as a result of the current quiet in the volatility of Bitcoin and ETH. Specifically, BTC saw a significant 13.3% drop in on-chain volume, indicating a decrease in trading activity on Bitcoin Network.

The NFT market currently has a market capitalization of about $20 billion, with approximately 30,000 unique users interacting with the market on a daily basis.

NFT volume is random and cannot fully represent the market as a whole, but we can still see that volume is down significantly comparing to April. In May, volume started solid at $27 million, jumped to $35 million, then dropped by two-thirds before partially recovering.

The Milady Maker collection was mentioned in a tweet by Elon Musk on May 10, 2023, which caused trading volume to spike to $13.95 million, sending prices soaring. The mid-month spike shows how young the NFT market is. The bigger picture can be skewed by “hot” new collections or sales that come and go quickly in terms of popularity.

Though, on May 10th, the number of users in the NFT market is not increasing a lot, so we may speculate that the NFT user base is not growing significantly at the moment, even though Milady Maker’s collection is getting hot, the users are still the same people who have been in this market for a long time.

At the beginning of May, there were more NFT buyers than sellers, with the ratio being 2:1, mostly because of some projects on Polygon as below, with a bunch of buyers and only several sellers on the secondary market.

According to the data of daily buyers & sellers, there are still more NFTs listed for sale than active buyers interested in buying them, indicating a potential oversupply of NFTs, not necessarily subpar collections.

While the NFT market has experienced fluctuations, it is still a growing industry with the potential for long-term growth and acceptance.

Ethereum dominates NFT volume with over 95% of the total market. However, in terms of unique active wallets, about 40% are on Ethereum, 34% on Polygon and 16% on Solana.

While still small compared to traditional markets, growing unique participation across multiple chains is a healthier sign for the NFT space than if the large majority remained concentrated on Ethereum alone.

According to Footprint Analytics, over 70% of wash-trading takes place on x2y2, indicating that their systems and policies allow manipulative behavior with fewer barriers – whether intentional or not, this highlights the speculative nature of the current NFT market and the need for continued progress towards transparency, trust and genuine mainstream interest.

It is expected for the wash trade value to decrease as the NFT market experiences a downturn, but it is noteworthy that the wash trade percentage has also decreased over the past three months.

After a brief period of euphoria caused by the Blur airdrop, the NFT market has now returned to a bearish state, characterised by a marked decline in speculator enthusiasm.

Footprint Analytics has conducted an analysis of the top 50 volume collections. This shows a decrease in the prevalence of wash trading, which can be primarily attributed to two key factors:

• Speculation-driven projects

Projects such as MineablePunks and Terraforms by Mathcastles initially gained significant trading volume based on speculation. However, these projects were based solely on hype and lacked substantial underlying value. As traders and investors realised the limited utility and long-term potential of these collections, interest waned, resulting in a loss of sustained trading activity.

• Wash trading during the hype

Wash trading played a significant role in certain collections at the height of their hype. However, as the excitement and frenzy around these collections subsided, speculators no longer found it advantageous to engage in such activity. As a result, both wash trading and overall trading volume declined. This trend was particularly evident for collections hosted on the Opensea platform(Opensea collections).

As speculators reduce their trading activity, it is expected that the prices of certain collections may take a hit. However, this period of lull in the NFT market actually fosters a healthier environment, paving the way for future prosperity.

In addition, the market slowdown is lowering barriers to entry, providing opportunities for genuine users and game developers to participate. With less speculative trading dominating the market, project teams can now focus on their project. This strategic shift allows them to lay the groundwork for a potential recovery in the next market cycle and attract long-term investors who value the sustainable growth and utility of NFT projects.

When it comes marketplaces, according to the latest data, Blur is currently the leading NFT marketplace with a monthly value share of around 60%. This is followed by OpenSea with around 20% and x2y2 with around 10%.

The total amount raised in May was $43.2 million, the highest since November 2022. However, there were only 7 funding rounds, which is a relatively low number.

In May, two significant NFT funding with the most amount are Pudgy Penguins and AlienSwap. Pudgy Penguins raised a $9 million seed round led by 1kx to build the next great IP company. And AlienSwap raised $12 million led by NEXT Leader Capital and C² Ventures to expand the AlienSwap engineering team.

The higher amounts invested in May are a positive signal of renewed optimism, despite a slowdown in actual market activity and participation. However, sustainability depends on broader success across more projects.

Ordinals are a unique category of NFTs that are based on the Bitcoin network. Ordinals have seen insane growth in the few months. A Twitter Space from Footprint Analytics talked about this topic.

It begins on January 21, 2023, when programmer and crypto enthusiast Casey Rodarmor launched the Ordinals protocol on the Bitcoin network. The innovation allows for the minting of Bitcoin NFTs. Ordinals caused a high number of Bitcoin transactions in May.

They introduce a new dimension to digital collectibles and asset ownership by allowing users to add arbitrary data to a Bitcoin transaction and tie that data to an individual satoshi, creating a unique asset known as an ordinal. For now, it has minted over 10 million according to Footprint data.

The Ordinals protocol is still in its infancy, with lightweight wallet applications, NFT trading markets, and other “infrastructure” yet to be built. People still expect the future and further expansion of the Bitcoin network.

This piece is contributed by the Footprint Analytics community.

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DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your research before investing.