OpenSea CEO seeks to distance NFTs from crypto crisis

by James · December 29, 2022

The CEO of OpenSea, the world’s leading non-fungible token marketplace, has sought to distance NFTs from cryptocurrencies as the sector is hit by a series of scandals.

Devin Finzer, 32, told the Financial Times that the crypto industry had seen “some setbacks recently,” citing the fall of FTX, the cryptocurrency exchange that collapsed into bankruptcy in November and helped trigger a drop in the value of digital assets.

OpenSea rose in value as collectibles and digital art called NFTs built on the same blockchain technology as cryptocurrencies became a hype-driven market over the past two years.

But the head of the New York-based company insisted that NFTs retain a bright future, believing that consumers will continue to spend real-world money to acquire digital images and display them in their homes and in virtual spaces online .

“It is not necessarily the case that NFTs will always be bought and sold denominated in cryptocurrency as they are today,” he said. “There are a number of reasons why it makes sense in the current ecosystem, but as we become broader and more accessible, there’s no reason why NFTs can’t at least be denominated in US dollars.”

OpenSea has seen monthly trading volumes in cryptocurrency ether fall 95 percent from a peak of $4.9 billion last January to $253 million in November, according to data from a user named “rchen” on Dune Analytics. The daily number of NFTs sold in ether on the platform has fallen 68 percent from a peak of 2.3 million in January to 740,000 last month.

“NFTs don’t exist in a vacuum, it’s the overall macro climate that has changed dramatically, affecting consumer spending and the broader crypto climate, which is experiencing a winter right now,” Finzer said.

The company cut 20 percent of its workforce in July, with Finzer predicting a “prolonged downturn” and leaving OpenSea with around 300 employees.

Finzer claims the company has a “healthy runway,” having raised $423 million over multiple funding rounds since 2021, which saw investments from venture capitalists Coatue and Andreessen Horowitz. Angels, including Reddit founder Alex Ohanian, actor Ashton Kutcher and singer Shawn Mendes, also participated in previous rounds.

OpenSea raised most of its capital, $300 million, during the latest funding round announced in January this year, valuing the company at $13.3 billion.

NFTs use blockchain technology to certify ownership of a digital asset, which is recorded on an immutable ledger of transactions. They use the same technology that underpins cryptocurrencies and are usually bought and sold in cryptocurrencies such as Ether.

This year, the crypto market has suffered a series of scandals, including the collapse of stablecoin terraUSD and a market-wide crash that sent the price of popular tokens like bitcoin plummeting. A number of pieces of legislation are being introduced to regulate the volatile industry, including the UK’s Financial Services and Markets Act and the EU’s Markets in Crypto-Assets Regulation.

Governments and law enforcement bodies around the world also decide whether NFTs should be registered and disclosed as financial securities.

“It is very important that regulators and government officials understand that this is not the same as the broader crypto industry where there is a lot of focus around financial use cases,” Finzer said.

He said the value of NFTs should be determined by how people engage with it, whether by using the tokens to attend exclusive events, play games or display digital artwork in their homes.

“People are already using Instagram [to share NFTs] with their friends,” Finzer said.”[In future] more and more of your property can be digital as opposed to physical art. . . right now there may be early adopters displaying NFTs inside their homes, but it may be something that continues to happen more and more.”