NFT trading volume on track to fall below $1B, but does it matter?

The non-fungible token (NFT) market is evolving, and measuring its success depends on which metrics you look at.

According to a new report released by DappRadar on Thursday, NFT trading volume for the month of May has reached $333 million so far, putting it on track to fall below $1 billion for the first time this year. In contrast, there have been 2.3 million sales so far this month and a noticeable increase in the number of weekly active wallets interacting with NFTs.

Sara Gherghelas, a blockchain analyst at DappRadar, told CoinDesk that the number of NFT sales appears to be on track to match or exceed last month’s numbers, in contrast to trading volume, which is significant after last month’s count. In her view, this may signal that there are more NFT traders in the market making trades with smaller dollars.

The number of unique active wallets linked to NFT activities grew by 27% in May, the report added, attributing the growth to Milady’s NFT collection – which received a notable pump from Elon Musk – as well as profits from the hyped PEPE token that led back to The NFT market. This contributed to an increase in activity on the chain, which sent Ethereum gas fees skyrocketing.

Overall, Ethereum (ETH) continues to lead the NFT market in trading volume, although other blockchains such as Solana and Polygon have a higher number of NFT sales, with 26.9% of NFT sales on Polygon and 13% on Solana, according to DappRadar .

“In terms of the number of NFT sales, Ethereum’s [market] its dominance falls to just 5.7%, indicating that the blockchain is primarily used to execute large volume sales, positioning it as the platform of choice for the ‘NFT aristocracy’, the report said.

And finally, Blur and OpenSea remain at odds over NFT market dominance, even though both excel in different areas, says DappRadar. Blur wins by a significant margin in terms of trade volume, with around $181 million in trades this month, mainly catalyzed by the launch of the Season 2 rewards campaign and the launch of the Blend lending protocol. However, OpenSea continues to have a greater number of active NFT traders than Blur, suggesting that it continues to dominate with a mainstream audience.

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Does trading volume matter at all?

So what does all this mean?

Gherghelas told CoinDesk that trading volume remains an important metric for measuring success in the NFT market, although the number has the potential to be manipulated by wash trading, especially among collectors looking to earn rewards on platforms like Blur.

“We saw the market manipulation that happened at Blur,” she said. “People are using the platform to farm [Blur tokens] and participate in airdrops.”

She added that Blur is not as concerned about the number of active traders on its platform, as it caters to a smaller number of professional traders with deep pockets and expansive portfolios.

“Right now, if you go on Blur, you’re using Blur to buy expensive NFTs, and this is the goal,” she explained. “[Pro platforms] need the big money flowing in and don’t care about getting more users.”

Other data support Gherghelas’ observations. Nansen tweeted in March that much of Blur’s trading volume at the time came from just the top 100 NFT traders.

Still, she said trading volume remains an important metric, as long as you consider the context.

“I think trading volume, at some points, is a very important metric to see exactly how much money is moving through the NFT market,” she said. “During the bull market, huge trading volumes meant a lot of people got into the room and people were enthusiastic. You could have made a lot of money.”

“Right now, if trading volume is down but sales numbers are up, it means we have the same number of traders but their behavior has changed.”

She added that it is important to consider the type of NFT you are looking at when considering trading volume. She mentions selling packs across metaverse platforms as different from selling art-based NFT collections.

“When we look at the trade volume for the metaverse, I think that’s a completely different topic,” she explained. “The volume of trade is important there because the volume of trade corresponds to the utility of the land, which corresponds to the profit you can make. It’s the whole ecosystem. It’s a new economy there.”