The NFT sector has gained more popularity and worldwide acceptance. The concept emerged after the decentralized finance (DeFi) frenzy, creating a loud buzz with its value proposition.
Notably, top venture capital firms, Paradigm and Andreessen Horowitz embraced NFT, spiking its recognition, usage, and investments. However, the amount of holders shorting tokens currently is rising. NFTGo reports that the total number of sellers in April 2023 exceeded the number of buyers.
Sellers Dominating The Non-Fungible Tokens Market In 2023
NFTGo, an analytics platform, reveals that there were just 7,907 buyers compared to the 8,641 sellers on April 26. Previously, the market fell to its second lowest point in the last 12 months on April 19 with just 5,893 buyers.
It closely mirrors the June 18, 2022, low value of 5,343 buyers. These figures hint at a dropping demand for NFTs which could reduce the value of NFTs for sellers.
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The co-founder of Canary Labs, Ovie Faruq, reacted to the buyer’s decline in a tweet. He stated that daily traders ranged from 20,000-60,000 in the past year. However, in the last few days, there has been a decline. Faruq believes that the market is not functional at the moment.
SVB Collapse Reason Behind Reduced NFT Trading Volumes
According to a data platform, DappRadar, NFT trading volumes were between $68 million and $71 million before the Silvergate Bank (SVB) collapse. However, they crashed to $36 million after the collapse on March 12, 2023.
Also, the daily NFT sales count dropped by 27.9% between March 9 and 11. According to this report, only 11,440 NFT traders were active on March 11. This represents the lowest figure recorded since November 2021.
DappRadar blames the de-peg of the USD Coin (USDC) to $0.88 as the event that moved traders’ attention from the market. However, despite the slump, the market value of some high-value collections was not significantly affected. These collections include Bored Ape Yacht Club (BAYC) and CryptoPunks.
NFT Wash Trades Increased
NFT wash trades spiked in February on the top six NFT marketplaces pushing the total trading volume to $580 million. CoinGecko reports that February 2023 ushered in a 126% increase from January’s trading volume of $250 million.
Wash trading is an illegal activity under US laws. A trader or robot buys and sells the same crypto asset multiple times to offer misleading information to the market. The goal is to artificially boost trading volume to lure retail traders leading to price inflation.
Magic Eden, OpenSea, Blur, X2Y2, CryptoPunks, and LooksRare, the top six marketplaces, saw an increase in wash trades. These marketplaces often offer users transaction rewards as incentives to increase trading volume.
A popular investor and crypto startup financer Mark Cuban, stated in January that wash trading will cause the next crisis in the crypto market. He believes the eventual discovery and removal of wash trades from exchanges will impact the crypto industry.
Featured image from Pixabay and chart from Tradingview