- The NFT market signaled a positive trajectory earlier this year.
- With investor interest declining, many NFT projects are now struggling, raising concerns about the market’s trajectory.
- The NFT market is gradually spiraling towards its doom as hundreds of NFTs remain at liquidation risk.
The intense rivalry among prominent NFT marketplaces, including Blur, OpenSea, and Magic Eden, combined with the emergence of new protocols like Bitcoin Ordinals, sparked renewed interest in NFTs earlier this year, signaling a promising recovery from the losses it incurred in the 2022 bear market.
However, as the initial euphoria fizzles out, investor interest is again waning, casting a shadow over the industry. High-profile NFT projects now face a daunting challenge to maintain their momentum as they gradually spiral toward their doom, sending tremors throughout the industry and raising concerns about the market’s trajectory.
NFTs Struggle to Stay Afloat
Despite the crypto market showing signs of recovery and investors growing excited about a potential bullish summer, the NFT market, in contrast, is struggling to stay afloat. Blue-chip NFT collections, once heralded for their hefty price tags, are plunging, leading to many investors losing billions of dollars.
In a recent report by Cirrus, the NFT market witnessed the “worst liquidation cascade in history” over the past three days. More than 1200 blue-chip NFTs, including Beanz, BAYC, and others used as loan collateral, have been liquidated due to a significant decline in NFT floor prices. Snow Genesis, an NFT analysis site, now warns that hundreds of additional NFTs remain at liquidation risk.
Among the affected projects, Beanz suffered the most brutal blow, recording over 600 liquidations, accounting for 3% of their total supply, serving as a stark reminder of the scale of the liquidation event and its impact.
Still, despite the challenging situation, there is a glimmer of hope as the rate of liquidations has notably simmered down in the past few hours. Many investors have managed to repay their debts, while others have listed their NFTs for auction. Although the number of underwater loans remains relatively low, the NFT market has yet to recover to alleviate ongoing concerns.
NFT Floor Prices Pull Back
In the past week, many major NFT collections have incurred considerable losses in their floor price, despite the overall upward trend across the broader crypto market. Blue-chip NFT collections like Bored Ape Yacht Club (BAYC) witnessed a sharp drop below 30 ETH recently, reaching its lowest point since October 2021. However, at press time, it has managed to rebound slightly, holding a floor price of 31.5 ETH.
Other notable NFT collections, like Azuki, have also been severely affected, with its floor price plummeting by over 20%. Its community members are growing furious, with many even considering legal action against its founders for releasing the ‘dilutive NFT project.’ Projects like Pudgy Pigeons, BAKC, and Moonbirds have also recorded significant losses during this period.
On the Flipside
- NFT thefts have also declined by over 80% in June compared to February.
- Many users predicted NFT lending protocols could significantly increase the risk of defaulting on the loan or, even worse, bring about a crisis similar to 2007’s subprime mortgage crisis.
Why This Matters
This liquidation event highlights the NFT market is still fragile, subject to volatility and challenges despite the crypto market recovering from a major capitulation event. It remains to be seen how these collections will recover and whether they will regain investor confidence.
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