TL;DR
NFT trading activity continued its upward trend at $318M of monthly volume. The increase in activity is also reflected in the average NFT prices, which have been rising since September 2022 lows despite the price of ETH being relatively flat. This suggests NFT floor prices (denominated in ETH) are rising.
Strategic developments led by major players are solidifying partnerships and strengthening the overall NFT ecosystem. Top NFT marketplace, OpenSea, is supporting Arbitrum Nova (blockchain specialized for social and gaming) and joining its data availability committee to grow their data infrastructure.
Trading volume per active wallet has reached its highest level for the second half of 2022. This suggests retail NFT users are continuing to get flushed out while institutional users are driving much of market activity.
There was significant percentage growth in volume on Polygon. This was due to Polygon's recent collaboration with name brand companies such as Reddit where it airdropped polygon-based “Collectible Avatars” in a step towards adopting blockchain technology. Such partnerships continue to garner chain adoption within the NFT ecosystem while others lose chain share.
Blur overtook OpenSea in trade volume, stark contrast from last year where more than 80% of monthly volume were on OpenSea. Advanced platform features are quickly gaining traction given most active traders are currently non-retail participants.
Volume for primary and secondary NFT listings start to diverge. As activity picks up on secondary listings, primary listings may follow as seen historically. Such divergence suggests a possible ending of the saturation phase of the market where significant NFT assets were produced.
Introduction: Global NFT Activity
NFT trading activity in December 2022 continued its upward trend at $318M of monthly volume, up ~35% from prior month. The increase in activity is also reflected in average NFT prices, which have been rising since September lows despite the price of ETH being relatively flat. This suggests NFT floor prices (denominated in ETH) are rising. Volatility in prices is also showcasing early signs of renewed appetite for risk amongst NFT creators and collectors. Despite the market remaining far below last year’s highs, there are notable strategic developments being led by major players that are strengthening the overall NFT ecosystem.
Source: The Block / Consensys
Source: Nonfungible / Consensys
One example is the top NFT marketplace, OpenSea, supporting Arbitrum Nova (chain specialized for social and gaming) and joining its data availability committee to grow their data infrastructure (disclaimer: Consensys is a member of the data availability committee). Arbitrum Nova is a new chain launched late last year and optimized for low transaction costs with security guarantees using AnyTrust technology for gaming and social applications. More developers are projected to migrate to Arbitrum Nova as it will significantly have lower transaction fees compared to Arbitrum One which is already 97% cheaper than Ethereum. According to L2BEAT, the total value locked on Arbitrum Nova has been increasing steadily since its launch late last year and has locked in ~5K ETH or $6.7M.
Sales Count
Sales count for Arts & Collectibles continued to trend upwards in December (+52%) on the back of Trump Digital Trading Cards where more than $3.5M were exchanged following the primary sale. However, despite reaching over 3K unique buyers, its volume and sales have now nearly diminished in similar fashion to Art Gobblers last month.
On the other hand, the gaming segment continued to trend downward in December (-2.5%) and for the second half of last year sales were down 31% while Arts & Collectibles were up 34%. But as mentioned in the December report, gaming lacks the velocity of new collections that collectibles see, making the segment much less varied; 98% of total sales occurred in just two NFT collections (Otherdeed and Sorare).
Source: The Block / Consensys
Source: The Block / Consensys
Active Market Wallets
Daily active market wallets trading NFTs have reached a new low of 8,518 wallets in December and they have been relatively flat since November despite an increase in price and activity as mentioned earlier. This is explained by a majority of the NFT activity that is driven by whales in the ecosystem.
Trading volume per active wallet has reached its highest level for the second half of last year, suggesting retail NFT users are continuing to get flushed out while existing users are driving much of market activity.
Source: Nonfungible / Consensys
Source: Nonfungible / Consensys
Unique Buyer & Seller Activity
Another way to keep pulse on the NFT market is by analyzing the unique numbers of buyers and sellers exchanging value in the ecosystem. The frequency of daily unique buyers to sellers have dwindled in December. Additionally, the number of unique buyers and sellers have also narrowed which continues to demonstrate the shift in sentiment following the FTX contagion and economic downturn.
Source: Nonfungible / Consensys
NFT Trade Volume by Chain
In December, trade volume by chain shows that the majority of increased volume occurred on Ethereum and Solana due to their dominance in the NFT ecosystem. However, there was significant percentage growth (243%) in volume on Polygon when compared to November. This was due to Polygon's recent collaboration with name brand companies such as Reddit where it airdropped Polygon-based “Collectible Avatars” in a step towards adopting blockchain technology. Such partnerships will continue to garner chain adoption within the NFT ecosystem while others lose chain share. Major detractors in December were Tezos (-67%) and Binance (-44%).
Source: The Block / Consensys
NFT Marketplace Share
As the overall trading volume continued to tick upwards in December, a major development occurred with Blur where it overtook OpenSea in daily trading volume with a peak of 26,121 ETH ($33M) compared to OpenSea 8,340 ETH ($9.9M). Launched only a few months ago, Blur has grown its market share to 37% as of December end which is equivalent to OpenSea market share. Blur is both a marketplace and an aggregator targeting professional NFT traders with advanced features such as floor sweeping and portfolio analytics. Most notably, it offers zero transaction fees and no enforcement of creator royalties; such features have quickly gained traction amongst institutional NFT investors who currently dominate market activity. Another catalyst for adoption has been Blur’s upcoming token launch, where early adopters will be airdropped tokens proportional to their activity. However, as retail users return and Blur’s cost incentives dry out, it remains to be seen how much market share it will be able to retain. We note that X2Y2 adopted a similar strategy to drive activity to its platform using token incentives, which proved successful in gaining market share despite activity falling in recent weeks.
Source: Dune/sealaunch
Primary & Secondary Market Activity
Lastly, we observed the declining volume of primary and secondary listings starting to diverge. As primary listings declined, demonstrating a slowdown in the production of assets, there has been an uptick in secondary listings in December. Such divergence suggests a possible ending of the saturation phase of the market where significant NFT assets were produced.
Source: Nonfungible / Consensys
Conclusion
Signs of recovery in the NFT market continue to emerge after a bottom in activity. NFT trading activity continued to pick up in December with increased volatility, possibly demonstrating renewed appetite for risky assets. While we remain far below 2022’s market peak, developments in infrastructure for NFTs continue to address the changing needs of users and developers with developments such as Arbitrum Nova. As we move forward, we are likely to see activity shift to higher quality NFTs from reputable partnerships (e.g. Polygon x Reddit) and sold via innovative marketplaces (e.g. Blur).
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