With the collapse of the Terra ecosystem and the thunderstorms of key players in the crypto space (BlockFi, Celsius and 3AC) we are experiencing an unprecedented “crypto winter”. However, if you do not die in adversity, you will break out in adversity. In this special period, if blockchain practitioners can regard the crisis as a difficult challenge and actively respond to it, I believe that they will soon be able to see the moon. .
In fact, if you look back at on-chain data from the past quarter, NFTs and Web3 have not been engulfed by bears, and there are plenty of reasons to be optimistic.
Let’s first talk about the unsatisfactory aspects of the encryption industry in the second quarter.
1. The collapse of Terra changed the blockchain market landscape
On May 7, the blockchain industry witnessed the collapse of Terra (the second largest DeFi ecosystem at the time), which had a huge impact on the entire crypto market, causing a 34% drop in the market value of cryptocurrencies. However, by July 8, the crypto market fell. Total market capitalization is back above $1 trillion again.
The collapse of the Terra ecosystem caused horrific financial losses to tens of thousands of retail investors, and not only that, but also some well-known investment institutions. The entire market is cloudy, and investors are even more impressed that cryptocurrencies are equivalent to high-risk assets, making this crypto winter even colder.
2. CeFi participants experience a liquidity crunch
Affected by the collapse of Terra, some centralized crypto lending platforms (CeFi) are also facing increasing challenges. Fearing a lack of liquidity caused by customer runs, the platforms began suspending withdrawals and transfers.
3. The Black Swan Effect of Three Arrows Capital in the Crypto Market
3AC (Three Arrows Capital) was once one of the most outstanding investment institutions in the blockchain industry. At its peak, the asset management scale even exceeded 10 billion US dollars. Its investment projects were mainly concentrated in Layer 1 blockchain (such as Terra), DeFi Protocols, centralized crypto equity companies, NFTs, and Web3 games, but now have to face bankruptcy.
It is clear that 3AC is over-leveraged due to poor risk management, especially after the Terra crash. The company fell into liquidation after failing to collect most of its deposits in time, dashing hopes of a cryptocurrency rally again. Additionally, 3AC’s funding in seed rounds for projects like Avalanche, Aave, dydx, and others may have a trickle-down effect. Once the 3AC is legally required to meet its obligations, the native cryptocurrencies of these protocols could experience severe selling pressure.
4. The total locked volume of DeFi returns to the level of 2021
The Terra debacle had a huge impact on the DeFi market, causing total lock-ups to fall to early 2021 levels, which at the time of writing were only around $70 billion, a 69% decrease from the end of Q1 2022 and a 33% decrease from a year ago.
Ethereum is still the most important DeFi support chain, with a lock-up volume of US$48 billion and a market dominance of 69%. The BNB chain has a lock-up volume of 6 billion, ranking second, followed by Polygon, Solana and Avalanche. back.
4. Stolen crypto assets reached $676 million in Q2
Four of the top 13 thefts by size of stolen assets in crypto history occurred in June. In total, $676 million in crypto assets have been stolen over the past three months. According to the Rekt database, Arda and Maiar under the Elrond ecosystem were stolen $127 million and $113 million respectively in June.
However, while the cryptocurrency market was hit hard in the second quarter, NFTs and Web3 were not beaten, and there are many reasons for optimism –
1. Q2 on-chain indicators still performed well year-on-year
Let’s start with a set of data: In June, the number of daily unique active wallets (UAW) interacting with blockchain DApps was 1.78 million, failing to exceed 2 million for the first time since September 2021. Looking at the entire second quarter, the average monthly UAW connected to blockchain DApps was 2.11 million, down 11% from the previous quarter, but still 62% higher than in Q2 2021.
Additionally, while transaction volume on Ethereum was down 40% from the previous quarter, sales rose 2% over the same period, illustrating the increased demand for the digital asset over the past three months. Meanwhile, the number of Solana NFT transactions doubled compared to the first quarter, with a 23% increase in volume over the same period. Plus, blue-chip NFT collectibles are starting to be seen more and more as a safer asset class than cryptocurrencies themselves. Finally, we see that even though the price of game tokens is still falling, blockchain games still attract a lot of venture capital, and the player base is steadily rising.
Therefore, although the crypto market is still showing a downward trend, the above signs all reveal positive signals. From a general perspective, the entire crypto industry is still looking good. It is not necessary to be affected by a temporary pessimistic atmosphere. Stay optimistic, Full of hope is the best way to get through the difficult times ahead.
2. Demand for NFTs is rising despite declining sales
In the second quarter of 2022, the NFT market has experienced a roller coaster.
At first, several indicators of the NFT market were affected by the collapse of the crypto market, but as investors’ mentality eased, NFT weathered the storm well, compared with the second quarter of 2021, the total transaction volume and sales were up 533% and 59%. Although OpenSea is the premier NFT exchange, its share has declined with the emergence of marketplaces such as LooksRare, x2y2, and Solana’s Magic Eden. The market cap of Ethereum’s top 100 NFT collection has declined due to the devaluation of ETH, which has fallen by 63% since the start of the first quarter.
However, NFT market capitalization data in ETH has continued to grow, having forked from a low of 3 million ETH in October last year to 6 million ETH in April. Currently, the NFT market capitalization has exceeded 5 million ETH, and although it has fallen by 8% since April, it has increased by 20% since May, as shown in the following figure:
Compared to the same period last year, Ethereum-based NFT collectibles have grown by 2093%, while Polygon has grown by 456% for an overall increase of 1999%. However, the game NFT encountered “Waterloo” in the second quarter, the overall transaction volume dropped by 82%, the transaction volume on the Ronin chain fell by 84%, and the Ethereum fell by 88%.
Solana and Avalanche emerged as clear winners in terms of on-chain transaction volume, with both blockchains seeing a 21% and 15% increase in transaction volume, respectively, despite a correction in the cryptocurrency market; Ethereum, BSC and Polygon suffered heavy losses , fell 41%, 22% and 59%, respectively, Flow and Ronin fell the most, have fallen 71% and 84%.
3. The NFT market war is unfolding
OpenSea and LooksRare are still the “overlords” of the NFT market, while the total transaction volume of Coinbase NFT is less than $3 million three months after its launch. According to Dune Analytics data, since its launch on April 20, Coinbase NFT has only traded $2.9 million, and as of now stands at $2,953,077 with 22,766 transactions. In the same period, the transaction volume of NFT market OpenSea has exceeded 5.9 billion US dollars, and as of now, it has reached 5,916,983,738 US dollars, and the transaction volume is 8,793,893;
In the NFT market in the second quarter, eBay’s acquisition of KnownOrigin became another major event. The e-commerce giant officially expanded the scope of digital goods. Whether it will pose a threat to OpenSea in the future is worth watching.
4. The future of chain games is bullish
Blockchain games are still performing well in the second quarter of 2022, with only a 5% drop in the number of unique wallet addresses. Many people once believed that if game DApps no longer bring economic benefits to ordinary users, they will definitely lose most of the player base. But it turned out not to be the case. The data will not lie. In the second quarter, blockchain games withstood the downward trend of the market, and the player base did not shrink significantly:
- Spliterlands has 350,000 daily active wallets, down just 4% compared to May;
- Alien Worlds only saw a 5% drop in the number of unique wallet addresses during the market downturn, while Upland and Upland increased by 4%;
- The Move-to-Earn (M2E) trend is sweeping the chain game market, STEPN has more than 2 million monthly registered users, and more than 262,000 wallets hold native GMT tokens. Other similar projects include Genopets, Step App, and DotMoovs, which extend the M2E idea in various ways to attract an active lifestyle through token rewards.
There is no doubt that the crypto blockchain industry is going through one of its most challenging times, and the collapse of LUNA and UST created enough selling pressure to drag down the price of BTC and drag down the entire crypto market. However, from the data point of view, the prospects of the DApp industry are still good, the NFT market continues to develop, and blockchain game adoption continues to consolidate.
So, despite the gloomy sentiment across the crypto market, there are reasons to be optimistic.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/data-interpretation-q2-encryption-market-nft-and-web3-have-not-been-knocked-down/
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