By Anushree Dave
Hello everyone, welcome to another distributed ledger. Meet Anushree Dave, crypto journalist at MarketWatch.
May is on track to become the first month of 2023 where NFT trading volume will fall well below $1 billion, according to new analysis from DappRadar. But brands, despite the low trading volume, are surprisingly still launching NFT collections.
As a reminder, NFTs, or non-fungible tokens, surged in popularity in 2021. It was exactly 2 years ago, in May 2021, when artist Beeple sold digital NFT art for $69 million. . NFTs are unique cryptographic tokens that can be linked to digital or physical items. They are backed by a blockchain and serve as a digital certificate that verifies ownership and authenticity.
But with the hype fading around the metaverse, web3, and crypto, it seems like traders aren't splurging on NFTs anymore like they used to. So why do brands continue to launch collections? Learn more below.
You can find me on Twitter at @anu__dave to share your thoughts on crypto, this newsletter, or your personal stories with digital assets.
Brands launch NFTs This week, popular toy company Mattel announced the launch of Fast and the Furious NFTs, ahead of the movie's release. Last month, Starbucks launched a new NFT collection, and Nike-owned RTFKT released a collection of digital sneakers from NFT, which LeBron James was later spotted wearing. Brands have not given up on their efforts to release non-fungible tokens.
But the data shows that the volume of NFT transactions is at its lowest level this year.
"In the month of May, the NFT market saw a significant shift. As of May 12, NFT trading volume had only reached $293 million," said Sara Gherghelas, blockchain analyst at DappRadar. "This implies that for the first time this year, monthly NFT transaction volume could be below the $1 billion mark."
Trade in projects like Donald Trump's NFTs, which sold out within 24 hours of its first release in December, plunged to an all-time low, falling 80% from all-time highs, the data shows. from OpenSea.
So why are brands continuing to launch them when the numbers seem to show the trend of buying and trading NFTs is waning? Because, in essence, launching NFT helps brands build a community of super fans. Many launches come with built-in perks that aren't accessible through other means.
Mattel's Fast & Furious project, for example, will give holders the chance to own a physical version of Suki's car if they manage to collect the full set. Starbucks NFTs reward and connect members by offering collectibles, digital stamps and access to exclusive benefits. As a result, companies that launch these projects always end up selling them. When Starbucks launched an NFT collection in March, it sold out within the first 20 minutes.
Other factors that contribute to low trading volume have nothing to do with brands and include increased transaction fees, which can occur when there is a short-term frenzy around a particular item that everyone exchanges.
The recent rise of Pepe Coin, which we discussed last week, has had this impact.
“There has been a noticeable tendency for NFT traders to offload large NFT holdings at a loss, in order to join the frenzy surrounding Pepe,” Gherghelas said. “This increase in activity on the blockchain subsequently led to a spike in transaction costs, which exceeded $100 in some cases. This increase in transaction costs impacted the transaction volume of NFTs from low value as traders worry about affordability."
The question that remains, according to Gherghelas, is how high transaction costs will shape the trajectory of the NFT market in the future. It is unclear whether the decline in trading volume this month signals a broader trend or just a temporary pullback driven by short-lived hype.
Crypto Industry Responds to Justice Department's Crypto Crackdown
The crypto industry is trying to figure out what to do with a US Department of Justice crackdown on crime on digital platforms. In an interview with the Financial Times, Eun Young Choi, director of the department's National Cryptocurrency Enforcement Team, said the DOJ focuses on companies that allow crimes to happen or commit them. themselves, such as money laundering.
Industry insiders say that's a good thing, but worry that too much enforcement without clear rules on how to regulate the space could push companies to operate outside the United States. You can read the full story here.
Crypto at a Glance
Bitcoin is up 0.47% this week and is trading at $27,084.70 on Thursday afternoon. Ether (ETHE) is up 0.82% over the same period and trading at $1,811.48 on Thursday afternoon.
Biggest Gainers Price %7-day return Render $2.36 39% Lido DAO $2.20 29.6% Conflux $0.29 17.3% Frax Share $7.25 15.8% Synthetix Network $2.34 15.3% Source: CoinGecko Biggest Decliners Price %7-day return XDC Network $0.031 -7.4% Klaytn $0.17 -5.1% Bitget Token $0.45 -4.0% Tether Gold $1,956 -3.7% Gate $4.86 -3.4% Source: CoinGecko
Where is Shaq? Lawyers for FTX investors struggle to serve papers on him [Wall Street Journal]
Crypto firm Ripple buys Swiss startup as SEC crackdown forces firms to consider overseas moves [CNBC]
EU states approve world's first comprehensive crypto rules [Reuters]
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