NFT Marketplaces Struggle for Dominance Amid Shrinking Trading Pool – CryptoMode
The dynamism of the non-fungible tokens (NFT) market has suddenly slowed down and liquidity has decreased. Will their strategies prove effective as marketplaces face a tough battle for a shrinking base of traders and investors?
Understanding NFT liquidity: From boom to bust
NFT liquidity denotes the convenience and availability of transactions of non-fungible tokens in the marketplace. High NFT liquidity suggests an active marketplace filled with many willing buyers and sellers, thus enabling fluid transactions. Conversely, reduced liquidity indicates a decrease in trading activity, which suggests the difficulty of finding counterparties for trades.
Data from Dune Analytics disclose a significant downward trend in daily trades in the last quarter. Trading volume experienced a significant drop, falling from approximately 44,000 NFT trades on March 13th to nearly 25,000 by June 12th.
Status of NFT sales: A closer look at the data
Based on a recent report from DappRadar, NFT sales in May 2023 have potentially dipped below $1 billion for the first time during the year. However, this seemingly sad statistic is only a fragment of the wider narrative.
An in-depth analysis in the report reveals a 27% increase in active wallets linked to NFT transactions in May. Milady’s NFT collection was the catalyst for this growth, fueled by significant marketing from tech mogul Elon Musk.
To counter declining trading activity, NFT marketplaces are increasing incentives for traders. On June 7, Blur, a leading NFT marketplace, unveiled improvements to its incentive structure. The updated system emphasizes rewarding bidders who engage in significant risk by awarding them the most bid points.
Blur aims to distribute $BLUR rewards to users who make authentic contributions to the platform’s growth, as a recent Twitter thread revealed. Nonetheless, underhanded strategies are set to lose effectiveness, including transferring NFTs for loyalty, engaging in wash trading, and submitting false bids.
From Rising Star to Underdog: The Case of LooksRare
LooksRare, an NFT marketplace that once boasted daily volumes in the hundreds of millions, has experienced a downward spiral since May 2022. Activity levels are now consistently below $10 million. Undeterred by this downturn, LooksRare hopes to reclaim its former prominence by unveiling a new rewards season on June 1. However, the platform’s history of wash trading may prevent future growth.
Despite low trading volumes, Kraken, a well-known cryptocurrency exchange, launched its NFT trading platform earlier this month, intensifying competition in the already congested market.
As of mid-May 2023, Blur is firmly established as the premier NFT marketplace, based on data from DappRadar. With an impressive 62% market share, it outperforms its nearest competitor, OpenSea, which currently has a 26% market share.
The shifting sands of the non-fungible token market landscape provide a stark reminder of the volatile and unpredictable nature of emerging digital assets. As marketplaces struggle with liquidity crunches, only time will tell which strategies will prove successful in the face of dwindling trader numbers.
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