Ethereum has been critical to the success of DeFi and, more recently, the growth of NFTs. While the space drew a lot of attention in the beginning of 2021, NFTs took over the ecosystem in July.
Over $1 billion in trading volumes have now been generated across multiple smart contract platforms. However, Ethereum’s primary and secondary markets accounted for nearly 80% of the activity.
Over the last few weeks, however, a strange trend has been observed between the price of Ethereum and one of the native marketplaces of NFTs, OpenSea.
Is the price of NFTs rising when the price of Ethereum falls?
OpenSea is one of the largest marketplaces for NFT sales, with a daily peak of 60k last week. In March, the average was around 7000 per day. Volumes on OpenSea have already surpassed $1 billion, and the number of unique addresses has recently reached an all-time high, according to Coinmetrics.
However, before NFT sales began to peak at the beginning of Q3, there was a significant drop in interest at the beginning of Q2. That is when Ethereum began its rally and reached an all-time high valuation of $4375.
In general, the sale of NFTs on Ethereum-supported platforms should have resulted in a price increase for ETH. Unfortunately, the chart above shows that this was not the case.
As shown, NFT sales initially peaked around the $7k mark before declining, just as ETH’s valuation increased. Until then, there had been a co-dependent increase between both. However, once ETH broke above $2000, NFT sales began to fall, and vice versa as it began to peak following the 19 May crash.
Is there a compelling reason?
There is, technically. It is important to note that the NFTs are priced in ETH, which means that users must first purchase ETH before they can purchase NFTs. The plan is to buy ETH in exchange for NFTs before selling them for more ETH and profits.
As a result, during ETH’s price rally, NFTs may have been too expensive to purchase because ETH pricing does not change, but ETH’s value does.
Is this a recurring occurrence?
Similar patterns may be seen in the future if the price of ETH begins to rise again. However, the demand for NFTs should eventually regulate pricing at a more distributed level.
The value of Ethereum is unlikely to be impacted by NFTs on a large scale. Especially since several other factors influence the industry’s largest altcoin.