The NFT market is booming while the crypto market remains sluggish. here’s why

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Salvation! Welcome to Distributed Ledger, our weekly crypto newsletter that hits your inbox every Thursday. I’m Frances Yue, crypto reporter at MarketWatch, and I’m going to bring you the latest and greatest digital assets from this week so far. Find me on Twitter at @FrancesYue_ to send feedback or tell us what you think we should cover.

Crypto at a Glance

Bitcoin BTCUSD, -1.32% posted a loss of 3.3% over the seven-session period, recently trading at around $43,044. Ether ETHUSD, -2.02%, traded down 6.1% from seven days ago, at around $3,229. Meme Dogecoin token DOGEUSD, -0.45% is down 3% over the past seven sessions, trading around $0.17, while another dog-themed Shiba Inu token SHIBUSD, -1 .88 has recorded a loss of 7.7% over the past seven days, trading at around $0.000028.

Crypto Metrics Biggest Winners Price 7 Day % Return Secret $8.85 32.9% Ecomi $0.0079 21.4% FTX Token $49.48 19.3% Osmosis $10.49 13.2% Theta Fuel $0.2 11.7% Loopring $1.21 -26% Kadena $8.07 -20.5% Computer Internet $28.04 -19.5% Gala $0.29 -19% THORChain 5, $8 -16.6%  Source: CoinGecko as of Jan 20 NFT Outperformance

Non-fungible tokens, or NFTs, which refer to non-interchangeable digital assets stored on a blockchain, are seeing their boom continue, as the overall crypto market has been sluggish in recent weeks. Major cryptocurrencies posted losses over the past seven days, although most traded on Thursday.

The largest NFT marketplace OpenSea, which typically accounts for over 90% of total NFT transaction volume, has seen its transaction volume on the Ethereum blockchain exceed $4 billion so far in January, on track to record its highest monthly volume in history, according to data from Dune Analytics.

“I think in general, NFT is kind of uncorrelated with the larger space of digital assets,” Eric Chen, co-founder of Injective, a decentralized exchange protocol, told Distributed. Ledger in an interview.

Major cryptocurrencies, especially bitcoin, have been trading alongside stocks as of late amid macro uncertainties, while NFTs are gaining more mainstream attention as businesses and celebrities deploy their own collections of NFTs.

More recently, Twitter launched a verification mechanism for NFT profile photos available to certain users.

Meanwhile, trademark filings show retail giant Walmart looking to create its own cryptocurrency and non-fungible tokens in a push to the metaverse. Gap Inc. recently launched digital hoodie art NFTs, following Nike, Adidas, and Macy’s, which have already made strides into the NFT space.

Additionally, NFTs gained popularity when Facebook FB, -0.95% changed its name to Meta in October to show its determination to build a Metaverse, in which NFTs are considered important components. Meta is also reportedly looking to create its own NFT marketplace, according to the Financial Times citing several people familiar with the matter.

“This mass-market brand awareness is driving adoption,” Paul Judge, managing partner at crypto venture capital firm Panoramic Ventures, said in an interview. The space saw more newcomers and also more activity per user, according to Judge.

“On the one hand, an NFT is a collectible, so you have people buying it and keeping it for a very long time. On the other side of the asset you have people who trade it and have different trading frequencies similar to the stock market,” Judge said. “You almost have to compare [NFT marketplaces] on the one hand to Etsy ETSY, -2.36% and eBay EBAY, -2.54%. But on the other side, you have to compare it to Nasdaq.

OpenSea versus LooksRare?

Despite OpenSea’s predominant market share, the platform has been criticized by some for its centralized nature and relatively high transaction fees of 2.5%.

This could partly explain why the recent launch of LooksRare, an NFT marketplace that has transaction fees below 2%, has generated some excitement. The platform also distributed 120 million LOOKS tokens, the platform’s native token, to OpenSea users to attract customers. Additionally, LooksRare pays out the daily transaction fees it has collected to users who stake their LOOKS tokens to incentivize increased usage of the platform.

LOOKS is currently trading at around $6.84, up 14% in the last 24 hours, according to CoinGecko.

The mechanism seems to work. On Wednesday, LooksRare saw a daily trading volume of more than $800 million, compared to a daily volume of more than $200 million on OpenSea, according to Dune Analytics. However, doubts have been raised that LooksRare’s volume has been inflated by the washout trade, as some investors attempt to manipulate the rewards pattern by creating repeat heavy selling.

It will take time to see if LooksRare’s model works, but the market pattern shows “what is the consumer and end-user demand to own technology and own some of the platforms they use every day” . said the Panoramic judge.

A representative for LooksRare did not respond to messages seeking comment.

Exchange NFT Marketplace

Crypto exchanges have also joined the race among NFT markets.

FTX launched a marketplace for Solana-based NFTs in October, while it later added collections of Ethereum-based NFTs.

Meanwhile, over 3.1 million people have joined the waitlist for Coinbase’s COIN platform, +0.97% to launch NFT. The crypto exchange has partnered with Mastercard MA, +0.91% to allow users to make purchases on the market using Mastercard debit and credit cards.

Crypto exchanges have their special place in this competition, said Robert Zagotta, managing director of crypto exchange Bitstamp USA, which is also planning to launch an NFT marketplace.

“If you can do more than one thing on a platform, there’s synergy or efficiency to be had there. Like you can use your crypto holdings to do things in the NFT world and use your NFT holdings to do things in the crypto world, either as collateral or for other things,” Zagotta said.

NFTs are all about unique art and assets and this category is just getting started, Zagotta added. “The types and scope of assets that would benefit from unique ownership and transactions will obviously continue to increase.”

Crypto companies, funds

In crypto-related company trading, shares of Coinbase Global Inc. COIN, +0.97%, traded up 3.2% to $226.5 on Thursday afternoon. It was down 0.7% in the last five trading sessions. Michael Saylor’s MicroStrategy Inc. MSTR -0.63% traded up 3.3% on Thursday at $475.53, and is down 2.9% over the past five days.

Mining company Riot Blockchain Inc. RIOT, -0.11% of shares gained 4.97% to $18.35, while it was down 8.6% in the past five days. Shares of Marathon Digital Holdings Inc. MARA, -0.08% plunged 5.6% to $26.25 with a loss of 6.5% over the past five days. Another miner, Ebang International Holdings Inc. EBON -0.56% traded up 6.4% to $0.93, while it posted a loss of 4.1% over the past five last days.

Overstock.com Inc. OSTK, -3.90% rose 0.8% to $46.8. Shares were down 8.9% in the five-session period.

Block Inc.’ SQ, -0.44% s shares are up 3.7% at $132.9, with a loss of 2.9% for the week. Shares of Tesla Inc. TSLA, +0.06% traded up 3.4% at $1,028.71, while its shares are down 0.25% over the past five sessions.

PayPal Holdings Inc. PYPL, -0.16% advanced 2.6% to $178, as it posted a loss of 1.6% over the five-session period. NVIDIA Corp. NVDA, -3.66% was up 1% at $253.44 and was looking at a loss of 4.7% over the past five days.

Advanced Micro Devices Inc. AMD, -4.97%, edged down 0.15% to $128.04 and was down 3.5% in the past five trading days on Thursday afternoon.

In the fund space, ProShares Bitcoin Strategy ETF BITO +2.67% was up 3.2% at $27.02 on Thursday, while Valkyrie Bitcoin Strategy ETF BTF +2.65% was up 3.2% at $27.02 on Thursday. 3.3% to $16.73. VanEck Bitcoin Strategy ETF XBTF, +2.89% gained 3.5% to $42.33.

Grayscale Bitcoin Trust GBTC, +3.57% was trading at $29.3, up 4.7% on Thursday afternoon.

Required readings

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