Daniel Maegaard, one of the more high-profile nonfungible token collectors, used to spend tens of thousands of dollars on CryptoPunks tokens featuring bizarre-looking people or apes a year ago. Recently, he has been buying NFTs that typically sell for less than $2,000.
The decline indicates the metamorphosis occurring in the digital images market once frequented by Justin Bieber and Madonna, whose popularity resulted in an unprecedented amount of NFTs being sold. Long-term collectors were the majority in the sector, as speculators and celebrities fled, leaving the possibility for potential applications as the main reason for NFT sales to fall 67% in the third quarter.
“There is more upside potential compared to other NFT projects with higher market capitalizations,” said the 32-year-old Maegaard, who began investing in NFTs connected to land sales in the blockchain-based game Axie Infinity in early 2019.
On average, NFTs sold at $120 on Oct. 3, down from $69 in February, according to market researcher NonFungible. The average price of an Ethereum-based NFT was $120 on Oct. 3, compared with $1,631 in early February, according to market data researcher NonFungible. Prices on the Ronin blockchain used by the Axie Infinity game were down to $16 as of Oct. 3, from $69 in February, according to market data researcher NonFungible.
The steep decline in cryptocurrency prices this year is mostly attributed to the drop. In addition, there is mounting concern about whether NFTs will be considered securities, in light of the US Securities and Exchange Commission’s investigation of Yuga Labs Inc., the creators of the popular Bored Ape Yacht Club tokens.
“There are not many interesting short-term trading spaces right now,” said NonFungible co-founder Gauthier Zuppinger. “That may be why the space is currently at a rather low pace.”
In September, buyers searched for bargains on NFT trading platforms, in addition to many new collections that debuted outside the Ethereum blockchain. According to DappRadar, OpenSea, the world’s biggest NFT marketplace, had a 38% market share in September, down from nearly 85% in March. Magic Eden, which increased its sales by a factor of two in September, has boomed in competition with x2y2 and x2y3. Last month, x2y3 increased its share to 31.3%, up from less than 1% in March.
According to DappRadar, the average price of an NFT on Magic Eden is $43 over the last 30 days, compared to $82 on OpenSea. As a result, people are more likely to acquire cheaper tokens while playing games rather than trying to gain thousands or millions of dollars through investing in art that might someday double in value.
“The NFT market is evolving, with traders moving from degens to more rational investors, according to DappRadar head of research Pedro Herrera. There is a lot of competition on the marketplaces.”
New NFTs reached all-time highs in the week of September 19, according to researcher Nansen — thanks to the debut of small NFT collections with low prices.
Nansen, however, advises against the notion that large, expensive collections are permanently out of fashion. Even when indexes like Bored Ape Yacht Club, Azuki, CryptoPunks and Doodles outperform others, Martin Lee, a research analyst at Nansen, says.
“While the overall number of transactions might be down, the more expensive, well-known collections still generate a great deal of attention and value,” Lee said.
Perhaps things have changed in the investor mindset.
According to crypto investor Aaron Brown, who contributes to Bloomberg Opinion, “NFTs no longer suffer from mania-driven pricing beyond compare.” However, he foresees collectible market NFTs experiencing the same ups and downs, manias and forgettings, that all collectible markets do.