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.
OpenSea users, volume, and transactions statistics. Source: DappRadarThe massive declines in daily volumes coincided with equally drastic drops in OpenSea users and their transactions, suggesting that the value and interest in the blockchain-based collectibles have diminished in the 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 the Bored Ape Yacht Club has dropped by 53% to 72.5 ETH on Aug. 28 versus a high of 153.7 ETH on May 1.
BAYC floor price throughout history. Source: CoinGeckoSimilarly, 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 will be purchased using Ether (ETH), which also means that NFT's 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 one Ether has fallen from $4,950 in November 2021 to below $1,500 in August 2022.
ETH/USD three-day price chart. Source: TradingViewBendDAO votes to improve NFT liquidity
Last week, BendDAO, a decentralized autonomous organization that enables NFT owners to collateralize their digital collectibles to take loans (in ETH) worth 30%-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 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, and lenders are finding it difficult to recover their loaned amount due to falling collateral valuations.
Related: Prosecutors want to claim NFTs as securities, alleges legal team of former OpenSea employee
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 4 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 u.
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