O volume of NFTs traded on the main marketplaces reached historic low Last seen in June 2021. Transaction fees on Ethereum also reach lower values dating back to July 2021 Understand how it is affect investors of this asset class with low liquidity – which measures the ability to liquidate its asset; that is, redeem the money invested.
The great NFT craze began to gain momentum in late July and early August 2021, as some notable projects gained more relevance in the market and communities were formed around collections such as BAYC (Bored Ape Yatch Club) and CryptoPunksbut its big hype came even with the emergence of Play-to-Earn in the second half of last year.Source: DefillamaOn July 5, 2021, the daily NFT volume was at $972 and this mark had not been surpassed – Fall – until this Tuesday (03/08/22); reaching ~$871.Only in the last 24 hours the market volume of NFTs has dropped by 18%, which can present a serious problem for investors in this industry due to its illiquid characteristic.
How the volume of NFTs seriously affects investment
Unlike fungible assets such as Bitcoin (BTC) or ether (ETH), non-fungible tokens (NFTs) may face a serious liquidity problem, which is greatly exacerbated in times of low volume. This twitter account commented as follows:
In almost all markets, there is always an exit no matter how deep you’re in. The zero liquidity #NFT event is going to be brutal. (before you hate…i love #NFT‘s)— Bob Loukas (@BobLoukas) March 7, 2022
“In almost every market, there is always a way out, no matter how deep you are in it. A zero liquidity event in #NFT would be brutal.”
This is because, due to the fungible characteristic of cryptocurrencies or fungible tokensdemand and the market are much wider when assets are equal to each other (with a few exceptions), so whoever wants to buy 1 BTC will buy (almost) any BTC available on the market, without differentiation. On the other hand, NFTs are unique collectible itemsthen the buyer will choose exactly that token they want, and to liquidate your position you need someone to want to buy exactly that unit. No other. If, normally, the lack of liquidity could already harm the NFT speculator, at times of historic low in volume, the problem becomes even more serious. That’s why it is always important to invest only in known and consciously studied markets. Understanding the advantages and disadvantages that that segment offers. Something interesting that helps to reduce the impact of illiquidity is the purchase motivated by factors other than just buy/sell speculation (buying cheap and selling more expensive); such as, for example, as a collector’s hobby, to participate in exclusive clubs or to hold ownership of an asset represented by the digital asset.
Transaction fees on Ethereum (GAS) also at historic low
Loss of interest in the market can affect investors negatively in many parameters, such as lack of liquidity for fungible or non-fungible assets and also a stagnation of price, demonstrating market indecision. But with a lower volume of trades and transactions on-chain, in which NFTs play a major role – since all their trades involve 2 or more on-chain transactions – network fees, or GAS, also decrease. This is because fees are influenced by transaction demand. The more the network is used, the less usable it becomes for those who are not willing to shell out a Samsung TV on gasfor example. With the drop in overall ETH volume, at a time of market surrounded by doubts and uncertainties due to macroeconomic factors and the brutal drop in NFTs trading, the GAS on the ethereum blockchain is looking for lows last seen around July 2021.According to different sourcesa average charged on transactions is at:In case you were waiting for an opportunity to move your ERC-20 or ERC-721 tokens, maybe now is a great time to do so!Having problems with the low liquidity of NFTs or taking advantage of the moment to transact on the Ethereum network? Tell us about your experience on Cointimes social networks: Telegram | twitter | Facebook | InstagramRead more:Buy and Sell Bitcoin and Other Cryptocurrencies on Coinext
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