- NFT trade volume on Ethereum declined 28.5% week-on-week, $22.34 million in digital assets were traded on the ETH network.
- Analysts argue that the decline in NFT trade volume is an indicator of a drop in Ethereum prices.
- Analysts predict a pullback to $1,500 is likely, but the Ethereum bullish wave has not ended yet.
NFT trade volume rapidly declined on the Ethereum network, with digital art’s contribution to activity on ETH shrinking. Analysts believe NFTs are dominant gas consumers on Ethereum and a decline in volume could fuel bearish sentiment among ETH holders.
Also read: Three reasons why proof-of-work ETH1 will survive Ethereum Merge
Why NFT activity decline on Ethereum is significant
The STACKS Podcast recently explored the relationship between Ethereum and NFT floor price. Punk9059, a leading influencer and authority on NFT Twitter, joined the podcast to share his thoughts on the relationship between the second-largest cryptocurrency and NFT floor prices.
When Ethereum climbs, it has historically been a positive for NFT prices, though most investors price their digital art and collectibles in ETH. Punk9059 believes Ethereum price and NFT floor prices have a direct correlation.
Relationship between Ethereum and NFT floor prices
A decline in Ethereum price resulted in capital outflow from NFTs, as investors pulled cash out of volatile assets including jpegs. Therefore, higher Ethereum prices are the dream scenario for NFT holders as it drives floor prices higher.
As of July 30, the monthly volume for NFT marketplaces is $626.11 million, a 41% decline from June 2022. An interesting insight is that July was the first month with more unique sellers than buyers. Unique buyer and seller wallets held up better than volumes.
July 30, 2022, marked the first time when NFT volumes declined year-on-year.
OpenSea USD Volumes: 2021 v. 2022
Ethereum’s dominant gas consumer, NFTs, is suffering a decline in trade volume. Checkmatey, a leading analyst, considers this a sign of declining demand. Therefore, the Ethereum price could drop in line with reduced demand.
NFTs are the dominant gas consumer on Ethereum and have been for a while.
This is low demand.
Cautious of prices folks, not seeing demand growth to support it. https://t.co/6EXZpCuyQZ
— _Checkɱate ⚡ (@_Checkmatey_) July 31, 2022