Crypto Market Sell-off Delivers NFT Trading Volume Boost

Key Insights:

• OpenSea NFT trading volumes have risen, supported by the crypto market sell-off.
• In February and March, OpenSea trading volumes slid in response to the crypto market upswing.
• The outlook for the NFT marketplace remains bright as more mainstream players enter the NFT space.

It was a positive start to 2022 for NFTs and OpenSea, with trading volumes hitting an all-time high in January. The upswing painted a bullish picture for the year ahead.

According to data from Dune Analytics, ETH trading volume hit $4.97bn in January. OpenSea’s previous all-time high was in August, with trading volume hitting $3.42bn.

February and March were disappointing, however, as the crypto market recovered from late January lows to early April highs.

NFT marketplace conditions appear to be improving, with the recent crypto market sell-off delivering support.

Trading Activity on OpenSea Supported by ETH at sub-$3,000

In March, ETH-based NFT trading volumes fell to $2.49bn, well below January’s $4.97bn and February’s $3.58bn.

At the time of writing, ETH trading volume sits at $1.30bn. While a straight-line extrapolation doesn’t look too impressive, a continued ETH pullback would support demand for NFTs.

Recovering from a January current-year low of $2,161, ETH revisited $3,500 levels in April before the last slide back to sub-$3,000. ETH has fallen in 6 out of 9 sessions, with a return to sub-$3,000 positive for ETH-based NFT trading on OpenSea.

With Polygon (MATIC) and Solana (SOL) based NFT trading volumes a fraction of OpenSea’s total trading volumes, ETH remains the area of focus.

Active traders have also rebounded this month. In January, active ETH-based NFT traders hit a record high of 546,145 before falling to 451,767 in March. For the current month, active ETH-based NFT traders have risen to 281,546.

On a straight-line basis, active traders could surpass January’s all-time high, another positive for OpenSea and NFTs.

Influence on Trading Volumes Is Beyond ETH Value

Factors beyond ETH will influence OpenSea trading activity, including competition, illicit activity, new NFT launches, and regulatory oversight.

This year, LooksRare (LOOKS) launched in January, with Coinbase about to enter the NFT space with CoinbaseNFT.

One final key driver for NFT transaction numbers, in particular, will be the acceptance of fiat money for payments. Coinbase forged a partnership with Mastercard at the start of the year, which will allow mainstream payments for NFTs.

Offering mainstream payments removes the need for prospective NFT collectors to create digital wallets and purchase crypto in volatile market conditions. The Coinbase decision to support Mastercard payments may force other NFT marketplaces to follow suit.

The good news for the NFT space is that mainstream names continue to explore and enter the digital asset space. For OpenSea, investors will also be monitoring how Solana-based NFTs perform.

Downside risks remain, however, including illicit activity and increased regulatory oversight. For a more accessible NFT marketplace, regulatory oversight will need to be supportive rather than punitive. How regulators move on NFTs may ultimately be linked to illicit activity across the NFT space.