Nfts
Are memecoins the cause of low prices in the NFT market?
It appears that there may be an inverse correlation between the memecoin market and the NFT market, with the prices of these two asset types moving in opposite directions.
In particular, the memecoin market could be at the origin of the severe suffering of the NFT market at the moment.
The fall in NFT prices: is it the fault of the memecoin market?
Comparing the recent months’ trend of the memecoin market with that of NFTs, there actually appears to be an apparent inverse correlation.
Using table of CryptoSlam’s monthly NFT sales volumes, it is notable that from June 2022 there was a real collapse.
Since then, the lowest point was recorded in September 2023, with only $300 million in monthly transactions.
In particular, after a brief and contained peak in December 2023, in 2024, the daily transaction volumes of NFT The number of cases remained above 25 million until April, then fell between May and June to just over 10 million.
In fact, monthly trading volume for the just-ended month of June was just $462 million, well below the $1.7 billion in December 2023.
In other words, monthly volumes during the year went from $1.7 billion in December 2023 to $462 million in June 2024, with a near-constant decline of 74%, concentrated mainly in the last two months.
Memecoin market pushes down NFT prices
A lot memecoin instead, in 2024 they performed well.
Taking as a reference the gains or losses of December 31, 2023, for example, Dogecoin is at +40%, Shiba Inu at +66%, Pepe even at +725% and Floki at +363%.
Even the new WIF (dogwifhat) registered a sensational +1,300%, while Bonk stopped at +77%.
These numbers taken together seem to indicate a possible flight of capital from the NFT market to the memecoin market.
However, if we only take into account the last 30 days, the inverse correlation does not seem to be present.
Market prices of the six major memecoins in June fell between 21% and 35%, with overall movements decidedly similar to each other.
Monthly trading volumes on the NFT market in June were down 25% from May, a drop of the same order of magnitude as memecoin prices.
Prices and volumes
However, one should not compare prices and volumes, because they are two different things.
It is possible, however, that a drop in NFT sales volumes corresponds to a drop in prices, given that volumes are calculated by multiplying prices by quantities.
So, while on the one hand there doesn’t seem to be a direct correlation, the hypothesis that is circulating is that during the second quarter of the current year, taken as a whole, a wave of new memecoins about VIPs, politics and animals could have diverted capital from the NFT market, and the decline of the crypto market did the rest.
It is worth noting that overall NFT market volumes in June were still below the lowest monthly peak of 2022, the year of bear marketand this suggests that there might be some sort of time lag between this market and the memecoin market.
On the other hand, for example, the historic peak in the monthly trading volume of NFTs was recorded in January 2022, a good two months after that of the cryptocurrency market.
The hypothesis of the co-founder of Animoca Brands
In a recent interview Animoca Brands co-founder and executive chairman Yat Siu said he believes the NFT market could recover.
He said that a new speculative bubble should not be necessary to see this market recover, because NFTs can also be used in games, for intellectual property rights and for many other things, and this could generate demand.
However, from his words, it is clear that the NFT market boom has already happened and that there do not seem to be the conditions for a new real boom in the short term.
On the other hand, he considers it illogical that the monthly trading volumes are so low, mainly attributing this situation to the summer period. In fact, he believes that when market activity resumes, we will see more volumes, trading and activity.
This hypothesis could also explain why even major memecoins performed poorly in June.
Market recovery
Many expect the memecoin market to recover, after the general decline in June.
It is not certain that the usual memecoins will always perform well, as new ones are constantly being created that sometimes manage to make a splash and attract capital that does not flow to other memecoins.
It is also possible that during periods when memecoins – especially new ones – attract a lot of capital, this will also be drained from the NFT market, and it is possible that summer will not be a particularly bright time for the markets financial as a whole.
For example, even in June 2021 there was a decline in monthly NFT volumes, but in July there was the first big boom. June 2022 was a bloodbath, but there was the implosion of the Terra/Luna ecosystem. In 2023, the decline lasted for eight consecutive months, from March to October.
All this allows us to imagine that sooner or later this market will be able to recover, even if perhaps, as Yat Siu says, we will have to wait for a broader and more massive use of NFT technology beyond the art market.