• According to Dune Analytics, OpenSea, the NFT (irreplaceable) marketplace, hit a record $261 million in one-day trading volume in January. The platform also boasts a record 546,000 active users. Benjamin Cohen, managing partner of cryptocurrency fund Web 3 Equities, told Blockworks that when markets expand this fast, it’s reasonable to predict [it] will see huge volatility and corrections.
  • Investors may also be scared off by allegations that the U.S. Securities and Exchange Commission is investigating whether some NFTs may have violated securities laws. According to Stephen Young, founder of the marketplace NFTfi, money grabbing initiatives in NFT will die out, but the broader blockchain-based collectibles market will not.
  • According to blockchain analytics dashboard DappRadar, OpenSea’s transaction volume and trading volume plummeted 36.9% and 14.49%, respectively, last month. According to DappRadar, NFT saw sales of more than $4 billion in February, a 28 percent drop from January. On the other hand, transaction volume last month was still higher than in November and December.

The year of NFT is 2021, from when artist Beeple sold NFT at Christie's for $69 million to when Jack Dorsey of Block posted his first tweet.

Huge fluctuations and corrections

The bullish trend continues through 2022. According to Dune Analytics, OpenSea, the NFT (irreplaceable) marketplace, saw a record $261 million in one-day trading volume in January. The platform also boasts a record 546,000 active users. Benjamin Cohen, managing partner of cryptocurrency fund Web 3 Equities, told Blockworks that when markets expand this fast, it's reasonable to predict [it] will see huge volatility and corrections.

In February, the multibillion-dollar industry took a turn for the worse. According to blockchain analytics dashboard DappRadar, OpenSea's trading volume and volume plummeted 36.9 percent and 14.49 percent, respectively, last month. According to DappRadar, NFT saw sales of more than $4 billion in February, a 28 percent drop from January. On the other hand, transaction volume last month was still higher than in November and December.

According to Google Trends, searches for NFT fell 58% in February compared to January. I expect NFT to suffer a correction like any other market instrument, Kevin Kang, founding principal of cryptocurrency hedge fund BKCoin Capital, told Blockworks. The risk-averse mentality in the market will not be immune to NFT, as mainstream art collectors tend to view NFT as a riskier asset. Sotheby's CryptoPunk auction, when a pseudonymous consignor withdrew a large amount of CryptoPunk (estimated to be worth $30 million) minutes before the auction, may have been a warning of the decline.

Possible violation of securities laws

Investors may also be scared off by allegations that the U.S. Securities and Exchange Commission is investigating whether some NFTs may have violated securities laws. According to Stephen Young, founder of the marketplace NFTfi, money grabbing initiatives in NFT will die out, but the broader blockchain-based collectibles market will not.

[NFT] Young added that the prices are a little crazy, so we're in a period of bubbles and froth in the market. The [NFTs] have nothing to do with the cryptocurrency market boom at all. This [number of NFTs] will continue to go up indefinitely. That's what happens when there aren't enough new buyers to absorb the current supply.

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