The global NFT market has seen a significant downturn recently, with various platforms and investors feeling the impact. As the hype surrounding NFTs subsided last year, the market experienced a correction, leading to a decline in trading volumes and valuations.
OpenSea, one of the largest NFT marketplaces, has been hit particularly hard, with its valuation now facing a significant cut by one of its most prominent investors, Tiger Global. According to a recent report by The Information, Tiger Global, a $13 billion tech-focused venture fund, recently disclosed that its equity in OpenSea has dropped from $126.8 million to $30.2 million, representing a 76% drawdown. The firm became one of the largest investors in OpenSea when the NFT platform raised $300 million during a Series C round earlier last year.
Last December, the firm reported a 20% paper loss, with over half of that drawdown coming from its crypto-related investments. The New York-based firm established its venture fund in 2021 before placing sizeable bets on blue-chip crypto startups. Some other notable firms that the firm had reportedly dabbled in include Bored Ape Yacht Club creator Yuga Labs, MoonPay, and FTX, which went under last November, completely wiping out the firm’s investment.
NFTs Tank Alongside Cryptocurrencies
Despite the number of NFT projects growing to record highs in the past year, the overall income of the industry has been dwindling as crypto prices dump. In the past year or so, most cryptocurrencies, including Bitcoin and Ether, have dipped by over 70%, a scenario that could have triggered a loss of interest in NTFs.
In its recent report, Tiger Global valued OpenSea at just $3Billion, despite the popular NFT marketplace hitting a $13.3 billion valuation at the height of NFT mania last year. This value drop has been largely attributed to the drop in NFT sales plummet and increased competition from rival platforms like Blur.
But OpenSea is not the only casualty of the NFT market downturn. Other platforms, including Rarible, have also seen a decline in trading volumes and valuations. Meanwhile, high-profile NFT sales have slowed, with many artists and collectors holding back as the market cools off.
There Is Still Hope
That said, despite the downturn, there are still reasons to be optimistic about the future of NFTs. According to a recent report by DAPP Radar, despite a disappointing end to the year 2022, NFTs had a strong Q1 2023, with a 137.04% increase in trading volume to $4.7 billion, the highest since Q2 2022.
This renewed growth has been fuelled by the launch of new marketplaces and protocols such as NFTFi, which seek to bridge the gap between DeFi and NFT ecosystems by introducing various approaches to unlock liquidity for NFTs.
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