OpenSea Fall In Daily Transactions Spells Doom for NFT Collections

The world's most significant nonfungible token (NFT) marketplace, OpenSea, is currently victim to substantial drops in daily volume as fear of a possible market crash lingers.

Mainly the exchange only processed $5 million worth of NFT transactions on Aug. 28 — approximately 99% lower than its record high of $405.75 million on May 1, according to DappRadar.

These enormous drops in daily volumes overlap with almost identical drops in OpenSea users and their transactions, leading to many believing that the interest and value of these once illustrious blockchain-based collectibles have dwindled in recent months.

Further evidence can be analyzed in the falling floor prices- the minimum amount an NFT is listed for in a collection- of the most prominent projects in the space.

For example, the floor price of the Bored Ape Yacht Club has fallen by 53% to 72.5 ETH on Aug. 28 versus a high of 153.7 ETH on May 1. Similarly, the floor price of CryptoPunks, another high-ranking NFT collection, has dropped 20% from its high in July of 83.72 ETH.

NFT prices are based on the native token of the blockchain the project was built on. So if an NFT is minted on Ethereum, the digital collectible will then be purchased in Ether (ETH). In turn, if the price of ETH begins to fall, so will the value of the NFT.

Ethereum's recent struggles in the market seem to be the main driver behind NFT's lackluster past couple of months. Notably, the price of ETH has slashed from its all-time high of $4,950 in November 2021 to around $1,500 today.

Last week BendDAO, a decentralized autonomous organization that allows NFT collectors to collateralize their digital collectibles to take loans in ETH worth 30-40% of the project's floor price, voted to change its code to make its NFT collateral more liquid.

The move came in response to the price of Ether increasing the value of the loans in dollar terms, which led to massive sell-offs of NFT projects, leaving the value of collateral owned by BendDAO significantly reduced.

As a result, BendDAO is now entering a debt crisis, as borrowers can not pay back the loans due to the drop in ETH prices, and lenders are facing issues recuperating their loaned coins due to the falling collateral valuations.

The DAOs recently voted to change the NFT liquidation threshold from 95% to 70% and reduce the time given to borrowers to avoid liquidation from 48 hours to 4 hours to attract more bids for their NFT collateral.

Alarmingly the floor prices of all NFT projects could risk falling even further if the market's liquidity persists to dry up.