NFT downfall continues: Trading volumes and Ethereum gas usage decline
Recent data shows a marked decrease in both trading volumes and Ethereum gas usage for nonfungible tokens (NFTs). As per the on-chain analytics platform Glassnode, the Ethereum gas consumption by NFT marketplaces, once topping the charts, has sharply fallen since its 2021 peak.
Holding NFTs instead of trading them
In 2021, leading NFT marketplaces and projects like Axie Infinity and OpenSea dominated the Ethereum gas consumption landscape. However, according to crypto analytics platform Nansen, these platforms now contribute a mere 3% to the entire Ethereum gas consumption.
According to data from Glassnode, gas consumption by NFTs is continuing its downward trajectory in 2023, with platforms such as Blur, OpenSea, SuperRare, LooksRare, and Rarible contributing just around 1.85% to the total Ethereum network’s gas consumption. The high-consuming projects of yesteryears, like OpenSea and Axie Infinity, have seemingly disappeared from Etherscan’s top 50 list. However, Blur still features in the top 30 gas consumers.
This marked downturn is causing speculation around a potential shift in the NFT landscape, with users possibly choosing to retain their assets instead of actively trading them on marketplaces.
Trading volumes continue to decline
Coinciding with this downturn in gas consumption, the NFT trading volume has seen a similar decline. According to a report by DappRadar, July 2023 was a particularly bad month for NFTs. The trading volume sank by 29%, and the number of sales decreased by 23% compared to June. Even top-tier collections such as Bored Ape Yacht Club and Azuki experienced drastic falls in floor prices.
A comparison of these numbers with the data from the start of the year paints an even bleaker picture. The NFT market started 2023 on a high, with 7.36 million sales in January. By July, however, the number of sales had plummeted to 3.7 million – a drop of 49%. Additionally, trading volume fell from $1.1 billion in January to a mere $600 million in July, marking the third straight month trading volume remained below a billion dollars.
On a slightly positive note, amid the downtrend, the Polygon network experienced a surge in activity. The lower gas fees on Polygon, as opposed to Ethereum, seem to have attracted more traders, allowing it to dominate the sales count with 27% of all trades in July. In addition, the shift towards ‘low barrier entry’ NFTs, catering to a wider audience and offering more affordable and accessible options, might partially explain the fluctuations in trading volume and network activity.
Bored Apes lose market dominance
The dominance of certain NFT collections is also waning. Yuga Labs’ Bored Ape Yacht Club NFT collection, which once commanded over 50% of every ranking, only managed to retain its position as the most traded collection in July, with only two other collections making it to the top ten.
Azuki, despite having three collections in the top 10, has struggled to recover from a price fall following criticism of its Elementals mint in June.
The steady decline in NFT trading volumes and Ethereum gas usage signal a significant shift in the landscape of digital collectibles. While it’s too soon to predict the future trajectory of NFTs, the current trend points to a cooling period before a period of explosive growth in 2024/2025.
