The FTX collapse is shattering the NFT ecosystem
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What happened
In response to the FTX bankruptcy, the cryptocurrency market is in a risk-off mood, with asset prices of all fungible and non-fungible cryptocurrency tokens plummeting.
The total market capitalization of all cryptocurrencies fell 23% from $1.2 trillion to $786 billion within four days. Nansen’s NFT-500 Index shows that the price of the non-fungible token (NFT) on the popular Ethereum price blockchain fell 14% over the same period. Solana NFTs have been hit even harder, with SolanaFloor showing a 68% drop in gross floor prices from his $424 million to $135 million over the past few days.
Among the top Ethereum blue chip collections, Bored Ape Yacht Club’s lowest price dropped 43% to $60,000, CryptoPunks dropped 37% to $69,000, and MoonBirds dropped 51% to $6,800. On Solana, DeGods’ lowest price dropped 66% to $2,700, Solana Monkey Business dropped 68% to $2,000, and y00ts dropped 70% to $840.
Part of the reason for the poor performance of the Solana NFT collection is that FTX advocates for the Solana Layer 1 blockchain. The price of the solana token dropped 68% to $12 as the exchange imploded. In addition to a slide of non-fungible tokens representing collections such as artwork that may differ from each other, FTX’s fungible exchange token known as FTT and FTX’s Solana-based Decentralized Exchange (DEX) Serum are They are down 89% and 53% respectively. recently.
The story of FTX’s bankruptcy is unfolding, but the bigger picture is starting to become clearer. The exchange apparently loaned customer deposits to a sister company, his Alameda Research. Alameda Research is a hedge fund and did not place discretionary bets on its assets. Alameda’s collapse caused his FTX to go bankrupt, creating a $10 billion hole in his balance sheet, and FTX filed for bankruptcy court protection on his Friday, November 11th.
broader context
FTX has emerged as a leading NFT player. The exchange has made strategic investments in major NFT projects, partnered to support new issuances, and launched its own marketplace.
FTX Ventures, the $2 billion venture capital arm of FTX, has invested in notable NFT projects such as Yuga Labs, creators of the Bored Ape Yacht Club. FTX Ventures also participated in Doodles’ recent Series A funding round, which raised funding for the makers of pastel profile picture avatars. $54 million Valuation is $704 million.
Additionally, FTX is aggressive with major issuances of new NFT collections. FTX has partnered with music festivals Coachella and Tomorrowland to issue his NFT, offering unique benefits and experiences for concert goers. We also partner with prominent brands and franchises such as the Golden State Warriors, Washington Wizards and Capitals, Dolphin Entertainment and Mercedes F1 to support our collections.
Despite these high-profile partnerships, FTX’s NFT platform has failed to gain momentum. Interestingly, NFT volume has surged to his $13 million since FTX’s solvency was recently questioned. This increase is likely due to users circumventing FTX’s alternative token withdrawal suspension by purchasing his NFTs and withdrawing those assets as a way to recoup value from the exchange.
main player
FTX – International offshore crypto exchange with FTX.US, the US division. FTX is one of the world’s largest exchanges by trading volume, serving institutional and individual clients.
Alameda Research – a hedge fund with trading and market-making activity on the FTX exchange
Sam Bankman-Fried (SBF) – Founder and former CEO of FTX and Alameda Research
main quote
“As an industry leader, FTX’s reputation has had a significant impact on cryptocurrency perceptions among retail users and investors. The collapse of the throat affected the average consumer less involved in the crypto industry than the NFT industry will see an increase in intimidation and skepticism among mainstream users in the short term.
NFTs and the cryptocurrency industry must regain the trust of the world. This is done through continued development of his NFTs with real-world utilities that can solve problems, albeit difficult ones. Given growing concerns over the financial risks of entering the cryptocurrency and NFT space, solutions that provide a revenue stream for creators and businesses are particularly beneficial to move the industry forward from this crisis. . “
- Gökçe Güven, Founder and CEO of Kalder
Key stats
Solana cryptocurrency-denominated Solana-based marketplaces, Magic Eden, OpenSea and Solanat, saw a significant increase in NFT trading volume, with over 250,000 Solana transactions, more than tripled from about 80,000 a week ago. rice field. As NFT prices fell, this volume increase suggests holders were rushing to exit and were offloading NFTs for the FTX incident.
Solana-based NFT trading volume surges
Dune analysis
Perspectives and Impact
The impact could fundamentally change the value proposition of solana and related projects, especially now that its biggest supporters are no longer able to support the ecosystem.
FTX and Alameda Research have been intrinsically linked to the solana blockchain since the protocol’s launch in 2020. The Solana token is also Alameda’s second largest holding, accounting for about 10% of the cryptocurrency’s market cap.
A brief threat of an acquisition by Binance this week has exacerbated the sale of Solana among Solana investors, with Binance CEO Changpeng Zhao selling assets to support competing blockchain token BNB. It aroused concern that Ultimately, his CZ, as he is known, scrapped the potential acquisition, but it seems that Solana still struggles with his association with FTX and Alameda.
Some investors have lost confidence in solana, as evidenced by the sale. This may discourage founders and creators from building new applications and his NFT collections on his solana, thus inhibiting the development of the solana ecosystem.
Decision
The full extent of the damage caused by the implosion of FTX and the extent of the infection are not yet known. Investors are encouraged to take control of their digital assets, including NFTs, and withdraw them from exchanges and other centralized platforms until the chaos subsides.
The market has entered another risk-off period and it could be a while before confidence returns. NFTs are Risky high beta play This means that your earnings will grow above and below compared to major crypto assets such as Bitcoin and Ether. Therefore, risk-averse investors may want to avoid buying NFTs until the situation is resolved.
Investors looking to place long-term bets may choose to support other major Layer 1 protocols and the fast-growing NFT ecosystems such as Ethereum, Binance Smart Chain, Polkadot and Avalanche. I have. Due to uncertainties regarding solana and solana-based projects, these alternatives may be better.
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