Cryptocurrency research firm Nansen has published a report shared with NewsBTC, on non-fungible tokens (NFTs) and their performance amid a continuing downtrend across the industry. NFTs have been a hot area since 2021 as they facilitated wider adoption of digital assets but have taken a toll as Bitcoin and other cryptocurrencies trended lower.
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According to Nansen, their NFT Blue Chip-10 and NFT 500 Indexes showed strength last month. At the time, Bitcoin and larger cryptocurrencies were on track to record yearly lows. The price of BTC has dropped to a multi-year low of around $17,500.
Meanwhile, Nansen Blue Chip-10 reported a gain of 23.6% at the beginning of June 2022 and could hint at bearish selling pressure on the industry. In June, the crypto market saw an event of speculation as major crypto investment firms became forced sellers when they defaulted on debt.
The NFT acts as an indicator of future activity for the cryptocurrency market. As the Nansen Indicators trended in reverse throughout June, the positive performance lingered and hinted at a local bottom formation for Bitcoin and Ethereum.
The report affirms the following about the overall sentiment in the crypto market and how NFTs have outperformed even during periods of turbulence and persistent selling pressure:
Blue Chip NFTs led the June trend reversal (…). Although the last week of June saw a bear market rally in the broader crypto market, it appears that this uptrend started earlier in the NFT market. All Non-Fungible Tokens (NFTs) sectors recorded gains in June (as measured in ETH), with the exception of gaming NFTs at the end of Q2 2022.
In July, the crypto market saw a relief with Bitcoin trading above its 2017 all-time high, north of $20,000. However, the price of BTC has been steadily declining and seems poised for another period of sideways and consolidation.
What NFTs spell for the crypto market in the short term
Additional data provided by Nansen claims the recovery in this sector may not be sustainable. Despite their positive performance in June, these digital assets recorded declines in trading volume, number of transactions, and active users, as seen below.
This decrease in industry activity corresponds to NFT investors reducing risk and adapting to current macroeconomic conditions. Nansen notes:
(…) In the Ethereum (ETH) DeFi sector, we are witnessing a significant write-off event with a sizable investor base realizing historically significant losses. The ‘risk-on’ sentiment is still evident in the NFT market and limited liquidity in the NFT market suggests that this uptrend may not be sustained (…).
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However, the sector saw an increase in first-time buyers and a decrease in the Buyer-Seller Ratio. This metric is used to measure the overall sentiment of NFT investors which appears to be more upbeat than the overall crypto market and, according to Nansen, “highlights the growth of the NFT as a sector.”