Solana NFT marketplace Formfunction shuts down despite raising $4.7M
Formfunction, an NFT marketplace based on Solana, is closing down only a year after it raised $4.7 million in seed funding from well-known investors such as OpenSea Ventures, Solana Ventures, and Variant Fund. The platform, which specialized in selling one-of-a-kind, single-edition artwork, will stop operating on March 29, as per a blog post by its founders.
Why is Formfunction closing?
While the official announcement did not provide any details about the reason for the closure, it’s safe to say that the recent struggles the NFT space is going through have had an impact.
As of November 2022, Formfunction boasted of being the third largest Solana-based NFT marketplace with a significant weekly trading volume. However, despite this recent success, the overall Solana NFT market has been declining.
According to CryptoSlam, the total trading volume for Solana NFTs was valued at approximately $76 million in February 2023, a decrease of over 50% from January and a significant drop from the $209 million recorded in March 2022 when Formfunction secured its funding.
Since the time of Formfunction’s funding announcement in March of last year, the NFT market has experienced substantial shifts. During that period, the market had high organic NFT trading volume each month, and there was a surge in prices for “blue chip” projects like the Bored Ape Yacht Club, with successful NFT mints generating tens or even hundreds of millions of dollars in sales.
Starting from May 2022, the broader crypto market’s struggle led to a sharp drop in demand for high-value NFTs, resulting in decreasing prices and trading volume. As per DappRadar, the monthly organic NFT trading volume remained below the $1 billion threshold from July 2022 to January 2023.
The NFT market experienced a surge in sales last month, with a total sales value of over $2 billion, more than twice the figure in January. However, a significant portion of the additional activity is attributed to traders on Blur, a new Ethereum NFT marketplace, who are quickly flipping assets to earn token rewards.
The NFT market has seen increased competition from new marketplaces that are reducing their platform fees and royalties for artists and creators on secondary sales. This has made it challenging for established marketplaces to remain competitive, and they have had to adopt similar strategies to retain their market share.
Several NFT projects end up dying during the bear market
Formfunction’s founders expressed their pride in their creation and appreciation for the support they received but ultimately decided to cease operations. The platform earned a 3% commission on secondary sales and a 5% cut on primary mints conducted on its platform.
Formfunction’s shutdown adds to a growing list of NFT marketplaces, like WazirX, that have faced financial difficulties or closed down. Just recently, Meta also announced that it would be abandoning its NFT projects to favor other innovations.
As we can see, several companies are stepping away from NFTs and several marketplaces are struggling to keep themselves alive during these tough times.