Introduction: The most valuable and potential blue-chip NFTs generally recognized by the market have fallen rapidly in the past week. Since the NFT market is mainly priced by ETH, and its price has continued to drop close to 1,000 USDT in the past week, the valuation of NFT has also fallen at an unprecedented rate.
The crypto market has taken a huge hit since June 11. Cryptocurrencies saw a broader sell-off on Sunday after data showed U.S. inflation hit a fresh 40-year high. The record high inflation poses a major challenge to the Fed. If it wants to control inflation, more aggressive monetary tightening may be required, and tighter monetary policy will increase the downward pressure on the economy and increase the probability of economic recession. One possibility is that the Fed had to trade a recession for price stability, thus recreating the “Volcker moment” of the year. This also means that the adjustment of overseas capital markets and crypto markets is not over, and the bearish sentiment may continue.
In this context, how does NFT perform?
Coping with the slump
In the past year, the NFT market has experienced an unprecedented bull market cycle. But the development of NFT is still in its early stage, and there is still the potential to return to the all-time high again, or even exceed the all-time high.
To assess the performance of NFTs in the current bear market cycle, we have listed three data phases that can reflect market sentiment.
1. April 2022: The bear market cycle of cryptocurrencies continues, with prices continuing to fall, still referred to by some analysts as Crab Market (volatility, but no significant rise or fall). The Russian-Ukrainian war and the Federal Reserve are the main factors affecting the price of cryptocurrencies.
2. May 2022: Due to the flash crash of LUNA coin, the bear market cycle of cryptocurrencies has been accelerated.
3. Current stage: going through the biggest bear market in the first half of 2022, the price dropped sharply, and some holders started to liquidate their assets.
Cooling market sentiment has greatly affected the average price of NFTs. Some blue-chip NFTs have reached their peak valuations before during the most frenetic phase. Since then, these valuations have continued to plummet, falling into a cooling cycle.
The chart below shows the change in the average price of NFTs in USD from April to May 2022 and compares it with the current average price in USD. It can be seen that the decline in the NFT market is still continuing. From the first market crash in early May, when UST unanchored, LUNA prices plummeted, and the Fed warned that inflation would soar, to the current bear market phase that began in early June.
The following table shows the decline in NFT prices under the shock of the cryptocurrency market. While some NFTs are more resilient than others, the general trend is still down. Holders are willing to incur losses ranging from 46% to 27% in order to sell their blue-chip NFTs. On average, blue-chip NFT holders lost 40% more money on sales in June than they did in April. The graph below shows the drop in average selling price for different NFT projects from April to June.
High-priced NFTs traded at a loss
In terms of transaction volume in the NFT market, blue-chip NFTs have always had the main advantage, and now some blue-chip NFTs are already being traded at loss prices. The real-time ranking of NFTGo high-priced transactions reflects the most expensive NFT transactions within a period of time. The figure below shows the distribution of NFT categories in the weekly sales leaderboard.
It can be seen that BAYC has the largest proportion in the NFT trading list. In the past week, more than 85% of high-value transactions came from BAYC. After BAYC is CryptoPunks, which accounts for about 3% of the total. BAYC’s dominance is both bearish and bullish on its own.
We found investors trying to buy BAYC in a bear market. At a time when the buying volume of other projects has been relatively quiet, BAYC still dominates the real-time ranking of high-priced NFT transactions.
But the question that comes with it is what is the price of these holders selling the high-priced blue-chip NFTs. We first looked at the average profit and loss of the top 200 trades over the past week. To further illustrate the impact of falling ETH prices on market valuations, we have drawn a profit and loss statement (PnL) in ETH and USD, calculated by subtracting the ask price from the bid price.
The data shows that while average profits in ETH are high, dollar-denominated profits are either negative or minimal relative to ETH’s generally positive returns. And this is a troubling signal for all NFT holders, as this situation means some holders would even be willing to incur additional dollar losses in order to clean up their NFT holdings, while “panic selling” is generally a cold winter One of the major signals to come.
Long-term value of NFT blue chips
The rare value of blue-chip NFTs can be measured from the following four points. One is the scarcity of the project where the NFTs are located – each Collection issues a specific number, mostly 10,000.
The second is the rarity value compared to other NFTs in the total collection. Rarity is closely related to the concept of conspicuous “exclusive” consumption – the similarity and aesthetic perception of NFTs and owners, in some cases also representing the emotional value of an attitude and identity. For example, the homogeneity of Azuki held by Jay Chou and its own characteristics.
The third is the use value, or premium, brought about by the scarcity effect of NFTs, including the fun of buying and selling NFTs, and various applications and extensions in the new field GameFi and the Metaverse.
The fourth is acquiring difficulty or time value. Scarcity value also reflects community maintenance costs. For example, the increase in the operation and maintenance cost of some community PASS will be reflected in the price, forming a closed-loop flywheel.
NFTs “have proven to resonate with retail investors over the past year”, especially in the first quarter of 2022, as more artists, creators and builders innovate, only time will tell Which industries will be the drivers of the market.
Volatility can vary per industry, and Nansen’s report shows that blue-chip NFTs by market capitalization have the least volatility. OpenSea top series such as Azuki, Clone X, Doodles are classified as blue chip. This may be because they are already well known in the crypto community and can be considered good long-term investments due to their track record of growth and value.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/how-is-the-performance-of-blue-chip-nfts-in-the-crypto-bear-market/
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