Ethereum has played a major role in the success of DeFi and, more recently, in the growth of NFTs. While the space received a lot of interest in early 2021, during the month of July, the NFTs took the ecosystem by storm.
Now, more than $ 1 billion in trading volumes have been generated through various smart contract platforms. However, Ethereum’s primary and secondary markets were responsible for close to 80% of the activity.
However, a peculiar trend can be observed between the price of Ethereum and one of NFT’s native markets, OpenSea, over the past few weeks.
Are NFTs Getting More Delighted When Ethereum Is Low?
OpenSea is one of the largest markets for NFT sales and hit a peak of 60k per day last week. By comparison, the average was around 7,000 a day in March. Volumes on OpenSea already exceed $ 1 billion, and according to Coinmetrics , the number of unique addresses also hit an all-time high recently.
However, before NFT’s sales began to peak during the beginning of the third quarter, it suffered a significant drop in interest at the beginning of the second quarter. That was the time period in which development of Ethereum began its rally and reached an all-time highest valuation of $ 4375.
Overall, the sale of NFT on Ethereum-compatible platforms should have triggered a rally for ETH Price. Unfortunately, based on the chart above, that was not the case.
As illustrated, development of NFT sales initially peaked around the 7k average before going down, just as ETH’s valuation rose. Until then, there was a codependent increase between the two. However, once ETH surpassed $ 2000, NFT sales started to decline and vice versa as they started to peak after the May 19 crash.
Is there a relevant reason?
Technically, there is. It is important to note that NFTs are priced in ETH, so users must purchase ETH before they can purchase NFT. The idea is to buy ETH for NFT, before selling NFT for more ETH and profit.
Therefore, during the ETH price rally, NFTs were possibly too expensive to buy, as the price in ETH does not change, but the value of ETH does.
Could it be a recurring incident?
Similar trends may be seen in the future if the ETH price starts to rally again. However, over time, the demand for NFT should regulate prices at a more distributed level.
Ethereum’s value is unlikely to be affected by larger-scale NFTs. Especially since there are several other factors that dictate the largest altcoin in the industry.