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The landscape of the non-fungible token (NFT) market is undergoing changes, and the assessment of its success varies depending on the metrics being considered.
In a recent report published by DappRadar on Thursday, it was revealed that the trading volume of NFTs in May has already reached $333 million, indicating a potential decline below the $1 billion mark for the first time this year. However, there has been a noteworthy surge in the number of sales, with 2.3 million transactions recorded so far this month. Additionally, there has been a significant rise in the number of weekly active wallets engaging with NFTs.
According to Sara Gherghelas, a blockchain analyst at DappRadar, the current trend suggests that the number of NFT sales is set to equal or exceed the figures from the previous month. However, when it comes to trading volume, it is noticeably lower compared to the previous month. Gherghelas speculates that this may indicate a rise in the number of NFT traders engaging in smaller transactions with lower monetary values.
The report states that the number of distinct active wallets involved in NFT-related actions increased by 27% in May. This growth is credited to the popularity of the Miladys NFT collection, which received a significant boost from Elon Musk's endorsement, along with the profits generated from the highly publicized PEPE token that flowed back into the NFT market. As a result, there was a surge in on-chain activity, causing Ethereum gas fees to soar.
Ethereum (ETH) continues to hold the top position in terms of overall trading volume in the NFT market. However, when it comes to the sheer number of NFT sales, Solana and Polygon have emerged as strong contenders. According to data from DappRadar, a notable 26.9% of NFT sales are happening on Polygon, while Solana captures a respectable 13% of the market share. These alternative blockchains have managed to carve out a significant presence in the NFT space, offering attractive options for buyers and sellers alike.
"When it comes to the number of NFT sales, Ethereum's [market] dominance slips to just 5.7%, indicating that the blockchain is primarily being utilized for conducting large volume sales, positioning it as the platform of choice for the 'NFT aristocracy,' the report says.
In the race for NFT marketplace dominance, Blur and OpenSea are locked in a competitive battle, each excelling in distinct areas, as stated by DappRadar. Blur emerges as the frontrunner in terms of trading volume, boasting an impressive $181 million in trades this month. This notable achievement can be attributed to the success of its Season 2 rewards campaign and the launch of its lending protocol Blend. Meanwhile, OpenSea maintains an edge with a larger community of active NFT traders, signifying its continued dominance among a broader audience. While Blur shines in trading volume, OpenSea retains its status as the go-to platform for a diverse range of NFT enthusiasts.
Does trading volume even matter?
So what does this all mean?
In the assessment of the NFT market, Gherghelas emphasized to CoinDesk the ongoing importance of trading volume as a key measure of success. However, she also raised a concern about the potential manipulation of this metric, specifically through practices like wash trading. This manipulation is particularly notable among collectors who are driven by the desire to earn rewards on platforms like Blur.
"We saw the market manipulation that was happening on Blur," she said. "People are using the platform to farm [Blur tokens] and participate in airdrops."
She further mentioned that Blur pays less attention to the quantity of active traders using its platform, as it specifically caters to a select group of well-heeled professional traders with substantial portfolios.
"Right now, if you go on Blur, you're using Blur to buy expensive NFTs and this is its target," she explained. "[Pro platforms] need the big money flowing in and don't care about getting more users."
Additional data supports Gherghelas' observations. In March, Nansen tweeted that a significant portion of Blur's trading volume originated from its top 100 NFT traders.
Nevertheless, she emphasized that while trading volume continues to be a significant metric, it is crucial to consider it within the appropriate context.
"I think the trading volume, at some points, is a very important metric to see exactly how much money is moving through the NFT market," she said. "During the bull market, huge trading volume meant that a lot of people were coming into the space and that people were enthusiastic. You could have made a lot of money."
"Right now, if the trading volume is down but the sales count is up, this means that we have the same amount of traders, but their behavior has changed."
She further emphasized the importance of considering the specific type of NFT when evaluating trading volume. She specifically highlighted the distinction between the sale of virtual land parcels across metaverse platforms and the sales of art-based NFT collections.
"When we look at the trading volume for the metaverse, I think that's a whole different topic," she explained. "The trading volume matters there because trading volume equals the utility of the land, which equals the profit that you can make. It's the whole ecosystem. It's a new economy there."
