Looks bare: OpenSea turns into NFT ghost-town after daily volume plunges 99% from peak
An ongoing debt crisis at lending platform BendDAO is also increasing the risk the NFT bubble will burst.
OpenSea, the world’s largest nonfungible token (NFT) marketplace, has witnessed a substantial drop in daily volumes as fears about a potential market bubble grow.
OpenSea volume plummets to yearly lows
Notably, the marketplace processed nearly $5 million worth of NFT transactions on Aug. 28 — approximately 99% lower than its record high of $405.75 million on May 1, according to DappRadar.
Meanwhile, on a monthly timeframe, OpenSea’s volume has dropped 90% from its January 2022’s peak of approximately $4.85 billion. In Ether (ETH) terms, the monthly drop in the same period is around 82%, according to Dune.
The massive declines in daily and monthly volumes coincided with equally drastic drops in OpenSea users and their transactions. This suggests that the value and interest in blockchain-based collectibles have diminished in recent months.
That is further visible in the falling floor prices — the minimum amount one is ready to pay for an NFT — of leading digital collectible projects.
For instance, the floor price of Bored Ape Yacht Club dropped by 53% to 72.5 E on Aug. 28 vs. a high of 153.7 ETH on May 1.
Similarly, the floor price of CryptoPunks, another top NFT collection, dropped almost 20% from its July high of 83.72 ETH.
NFT bubble is bursting
NFT prices are quoted in the native currency of the blockchain on which they are launched. So, a digital collectible created on Ethereum is purchased using Ether, which also means that NFT prices will fall if ETH’s market valuation plummets.
A bearish ETH market appears to be one of the primary drivers behind the poor NFT statistics. Notably, the price of 1 ETH has fallen from $4,950 in November 2021 to below $1,500 in August 2022.
Last week, BendDAO, a decentralized autonomous organization that enables NFT owners to collateralize their digital collectibles to take loans (in ETH) worth 30% to 40% of the NFT’s floor price, voted to change its protocol’s code to make its NFT collateral more liquid.
The vote occurred after a rise in Ether’s price increased the value of ETH-denominated loans in dollar terms. Meanwhile, on the other hand, NFT prices plummeted, reducing the value of the collateral held by BendDAO.
As a result, BendDAO is now facing its own debt crisis moment, where borrowers cannot pay their dollar-denominated loans due to falling ETH prices, while lenders are finding it difficult to recover their loaned amounts due to falling collateral valuations.
BendDAO’s latest vote has changed its NFT liquidation threshold from 95% to 70%. It has also reduced the time offered to borrowers to avoid liquidation from 48 hours to fo hours to attract more bids for their NFT collaterals.
In other words, the floor price of NFTs, including BAYC, risks plunging further if the market’s liquidity continues to dry up.