Why brands continue to launch NFTs, even though the hype has died down and trading volume is low

Why brands continue to launch NFTs, even though the hype has died down and trading volume is low

By Anushree Dave

Hello everyone, welcome back to another Distributed Ledger. This is Anushree Dave, crypto reporter at MarketWatch.

May is on track to be the first month in 2023 when NFT trading volume will fall well below $1 billion, according to new analysis from DappRadar. But brands, despite the low trade 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 NFT digital art for $69 million. NFTs are unique cryptographic tokens that can be attached to digital or physical objects. They are supported on a blockchain, and act as a digital certificate that confirms ownership and authenticity.

But with the hype fading around the metaverse, web3 and crypto, it seems traders aren’t splurging on NFTs like they used to. So why do brands keep launching collections? Read more below.

You can find me on Twitter at @anu__dave to share thoughts on crypto, this newsletter, or your personal stories with digital assets.

Brands launch NFTs This week, the famous toy company Mattel announced the launch of Fast and the Furious NFTs, ahead of the release of the movie. Last month, Starbucks launched a new NFT collection, and Nike-owned RTFKT released a digital sneaker collection of NFTs, which LeBron James was later seen wearing. Brands have not given up their efforts to release non-fungible tokens.

But data shows that NFT trading volume is at a low level this year.

“In the month of May, the NFT market has witnessed a significant shift. As of May 12, NFT trading volume has reached just $293 million,” said Sara Gherghelas, a blockchain analyst at DappRadar. “This means that for the first time this year, monthly NFT trading volume may fall below the $1 billion mark.”

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Trading in projects such as Donald Trump’s NFTs, which sold out within 24 hours when first released in December, has plunged to an all-time low, down 80% from all-time highs, according to OpenSea data.

So why do brands keep launching them when the numbers seem to show that the trend of buying and trading NFTs is dying out? Mostly, launching NFTs helps brands build a community of super fans. Many of the launches come with built-in benefits that cannot be accessed by other means.

Mattel’s Fast & Furious project, for example, will give owners the opportunity to own a physical version of Suki’s car if they manage to collect the entire set. Starbucks NFTs reward and connect with members by offering collectibles, digital stamps and access to exclusive benefits. As a result, the companies that launch these projects still end up selling them. When Starbucks launched an NFT collection in March, it sold out within the first 20 minutes.

Other factors contributing to low trading volume have nothing to do with brands and include the increase in transaction fees, which can happen when there is a short-term frenzy around a particular item that everyone trades.

The recent rise of Pepe Coin, which we covered last week, has had this impact.

“There has been a noticeable trend of NFT traders offloading large NFT holdings at a loss to join the Pepe frenzy,” Gherghelas said. “This increase in activity on the blockchain has subsequently led to an increase in transaction costs, which have exceeded $100 in some cases. This increase in transaction costs has affected the trading volume of low-value NFTs, as concerns about fairness have increased among traders. .”

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The question that remains, according to Gherghelas, is how the increased transaction costs will shape the path of the NFT market going forward. It is unclear whether this month’s drop in trading volume signals a larger trend or just a temporary setback fueled by short-term hype.

The crypto industry reacts to the Department of Justice crackdown on crypto

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, the director of the department’s national cryptocurrency enforcement team, said the DOJ is focusing on companies that enable or commit crimes such as money laundering.

Industry insiders say this is a good thing, but worry that too much enforcement without clear rules on how to regulate the space will lead to companies operating outside the US. You can read the whole story here.

Crypto in a flash

Bitcoin is up 0.47% this week, trading at $27,084.70 as of Thursday afternoon. Ether (ETHE) is up 0.82% over the same period, trading at $1,811.48 as of 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 

Must read

Where’s Shaq? Lawyers for FTX investors are struggling to serve him papers [Wall Street Journal]

Crypto firm Ripple buys Swiss startup as SEC crackdown forces companies to consider overseas moves [CNBC]

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EU states approve world’s first comprehensive crypto regulations [Reuters]

-Anushree Dave

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently of Dow Jones Newswires and The Wall Street Journal.


(END) Dow Jones Newswires

05-20-23 1535ET

Copyright (c) 2023 Dow Jones & Company, Inc.

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