Last month, the NFT market saw a spike in trading volume on April 5, followed by a massive 50% drop at the end of the month. The number of NFT sellers exceeds the number of buyers, basically indicating that the market may be oversupplied.
As these markets develop and grow, it is important for investors and traders to keep up with the latest developments and trends. By examining the key factors driving the cryptocurrency and NFT markets, we can better understand the opportunities and risks associated with these emerging trends.
Overview
Cryptocurrency markets have had their ups and downs in April, with Bitcoin rising to $30,506 and Ethereum topping $2,100 on positive economic data.
Despite some volatility, the cryptocurrency market stabilized at the end of April, with Bitcoin prices recovering to $30,000 and positive sentiment prevailing.
NFT market overview
Trading volumes in the NFT market spiked on April 5, only to plummet by 50% by the end of the month.
The number of NFT sellers exceeds the number of buyers, indicating that the market may be oversupplied.
NFT chain and market
Ethereum dominates NFT market volume, but network congestion and fees may push users toward alternatives like Polygon.
Blur and OpenSea cater to high-end and retail traders, but each is encroaching on the other's territory and may consolidate.
NFT investment and financing
Despite a slight increase in the number of NFT projects, the decrease in funding suggests investors are cautious about investing.
Platform building and scalability solutions are critical for NFTs, as evidenced by Flow’s $3 million in seed funding for its NFT marketplace.
hot topic
Combining AI and NFT technology emphasizes the importance of NFT provenance for copyright protection and the value of human creativity in artistic expression to strike a balance in sustainable development.
In April, the cryptocurrency market experienced some ups and downs. On April 14, most cryptocurrencies traded higher on better-than-expected U.S. economic data, with Bitcoin rising to $30,506, while ETH topped $2,100 on April 16.
On the macro front, official inflation rose to 5% in March, slightly below the consensus forecast of 5.1%. However, investors' focus has shifted to potential recession risks after the banking crisis exposed the fragility of the market's financial system. Recent data also points to a macroeconomic slowdown, with the ISM Purchasing Managers' Index falling to its lowest level since May 2020.
Despite the volatility, Bitcoin recovered to 30,000 in late April and sentiment across the cryptocurrency market was positive.
NFT market overview
The NFT market received a lot of attention in early 2021, with numerous projects launching their own NFT collections. However, the NFT market has already shown signs of softening this year.
Trading volume in the NFT market peaked on April 5, but daily trading volume dropped by 50% by the end of the month. This drop in trading activity points to growing investor caution as the initial enthusiasm for the NFT market appears to be fading.
Additionally, the number of sellers of NFTs in the market continues to outnumber the number of buyers, suggesting that underlying demand may not be sufficient.
The initial hype surrounding the NFT market was driven by the cryptocurrency market and celebrity endorsements, causing people to flock to the market. However, relatively few people understand NFTs, leading to an oversupply. It remains to be seen whether the fundamentals of NFTs can ultimately support market growth and open up new opportunities.
NFT chain and market
Ethereum accounts for the largest share of NFT trading volume, with a market share of 96%. However, in terms of active users, Ethereum only accounts for 44%, while Polygon’s active user base follows closely at 37%.
While Ethereum remains the platform of choice for most mainstream NFT projects, its network congestion and high transaction fees may prompt some users to switch to alternative platforms. As a result, Ethereum may face challenges in maintaining its dominance in the NFT market.
Polygon’s daily transaction volume is catching up with Ethereum, and the transaction volume is not high. The number of trades is still comparable, suggesting that it is more suitable for smaller traders due to the lower barrier to entry. Polygon’s low entry barriers make it more suitable for small transactions and asset exchanges, meaning its market may be more decentralized and multi-domain. However, it is also difficult to gather high-value, high-quality NFT projects and assets. Therefore, it takes longer to build a good ecosystem and accumulate assets.
From a market perspective, Blur still has an absolute advantage in terms of transaction volume. However, judging from the number of transactions, OpenSea still has the upper hand. Blur's dominant position indicates that it is more suitable for professional users with high-value assets and larger transaction sizes. On the other hand, OpenSea's transactions are looser and more decentralized, with smaller transaction sizes and more suitable for retail users and small daily transactions.
Blur and OpenSea represent high-end and small traders respectively. However, as the market develops across the board, both are cannibalizing each other and competition is becoming increasingly fierce. The future trend may be to further integrate high-end and small and medium-sized markets to create certain synergy effects. It is necessary to continue to monitor the performance of both platforms to predict their future development.
NFT investment and financing
Although the number of NFT financing projects increased slightly from the previous month, from 8 to 11, the amount of financing has declined, indicating that investors are more cautious.
Many builders are working on the NFT market. Flow secures $3 million in seed funding to build a rollup-centric NFT ecosystem, highlighting the growing need for layer 2 and scalability solutions to solve Ethereum network issues. In addition, the entry of large companies such as Amazon into the NFT market is expected to increase market visibility and scale, but will also increase industry risks.
Additionally, the music and entertainment industries are exploring NFTs, as evidenced by Muverse and Daniel Allan Entertainment receiving funding this month, opening up new opportunities for NFT applications.
hot topic
As Chatgpt became famous, people started talking about combining AI and NFTs, as NFTs are a great example of the creative economy in the crypto world.
KOL 6529 held a representative discussion on this topic. On the one hand, with the increase in the amount of AI-generated content, the importance of NFT traceability technology has become more prominent. NFT traceability can help distinguish the source and ownership of content and protect the copyright of content creators.
Instead, the proliferation of AI-generated content makes original human content more valuable. The uniqueness of human creations is difficult to be completely replaced by artificial intelligence, making original works even more scarce and valuable. Therefore, in an era of digital content overload, a creator’s ability to build a reputation is particularly important. Only by allowing more people to understand and recognize their works can creators stand out in the fierce content competition.
Commercial content creation is more likely to be replaced by AI, while artistic creation is difficult to be replaced by AI. Commercial content is usually completed around certain needs and can be efficiently generated through artificial intelligence technology, making it easier to be replaced by machines. In contrast, the value of a work of art lies in the author's expression of thoughts and emotions, which is difficult to achieve with artificial intelligence and requires the unique perspective and creativity of human artists.
Although artificial intelligence creates more and more works, human creativity is still irreplaceable in the form of artistic expression. Striking a balance between copyright protection, creative tools, and human expression is key to the sustainable development of NFTs and crypto.
The world of NFTs is evolving rapidly, with new trends and developments emerging every month. April was no exception, as the markets for these digital assets experienced significant volatility and new developments. Despite a spike in trading volume at the beginning of the month and a dip at the end of the month, the NFT market remains a vibrant and promising industry.
As the NFT market grows and matures, it’s important to stay up to date on the latest trends and developments. By understanding the opportunities and risks associated with this emerging technology, investors and traders can make informed decisions and take advantage of the potential of NFTs.
