NFTGo | Bear Market Special #1: Trend of Blue-chip NFTs in the Current Market

This article is authorized for repost by NFTGo.

The article analyzes the market from various aspects such as blue-chip NFT performance, who is buying the dip, the relevance to the crypto market, and tracking whale activities.

Bear Market Approaches

Recently, the Federal Reserve has been raising interest rates consecutively, causing flash crashes in LUNA and Celsius. Events related to regulation, stock market, and securities market correlations have led to significant volatility in various assets in the market.

The widely recognized and highly valued blue-chip NFTs have experienced a rapid decline over the past week. As the NFT market is primarily denominated in ETH and its price has been continuously plunging, nearing $1000 USDT over the past week, the valuation of NFTs has also plummeted at an unprecedented speed. In this bear market series, we will analyze the market from various aspects including the performance of blue-chip NFTs, who is bottom fishing, the relevance of the crypto market, and whale tracking. In the series #1, we will focus on:

• Which blue-chip NFTs are more resistant to decline?
• How much loss did investors incur after buying million-dollar NFTs at the peak of the cycle?
• The correlation between blue-chip NFTs and the overall trends of ETH and BTC markets

We let the data speak and explore hidden trends in the NFT market through a multidimensional perspective.

Dealing with the Plunge

Although the NFT market has experienced an unprecedented bull market cycle over the past year, the development of NFTs is still in its early stages, with the potential to return to historical highs or even surpass them.

To assess the performance of NFTs in the current bear market cycle, we have outlined three data stages that reflect market sentiment.

1. April 2022: The bear market cycle for cryptocurrencies continues, prices continue to decline, and some analysts still refer to it as a Crab Market (volatile, with no significant upward or downward trends). The Russia-Ukraine war and the Federal Reserve are the main factors affecting cryptocurrency prices.
2. May 2022: The flash crash in the price of LUNA accelerated the bear market cycle for cryptocurrencies.
3. Current Stage: Experiencing the largest bear market in the first half of 2022, with prices plummeting sharply, and some holders starting to liquidate assets.

The cooling market sentiment has greatly affected the average price of NFTs. During the most fervent stages, some blue-chip NFT valuations reached their peak. However, these valuations have since continued to plummet, entering a cooling-off period.

The graph below shows the changes in the average USD price of NFTs from April to May 2022 and compares it with the current average USD price. It is evident that the bearish trend in the NFT market is still ongoing. Since the first collapse in early May, when UST experienced a de-pegging, LUNA prices plummeted, the Federal Reserve warned of surging inflation, until the bear market phase that began in early June.

The table below illustrates the decline in NFT prices under the impact of the cryptocurrency market. While some NFTs show more resilience compared to others, the overall trend is still downward. Holders are willing to incur losses ranging from 46% to 27% to sell their blue-chip NFTs. On average, blue-chip NFT holders selling in June face losses around 40% higher than those who sold in April. The graph below shows the decline in average selling prices of different NFT projects from April to June.

High-Priced NFTs in Loss-Making Trades

In terms of trading volume in the NFT market, blue-chip NFTs have always had a major advantage, but now some blue-chip NFTs are being traded at a loss. The NFTGo real-time leaderboard for high-priced trades reflects the most expensive NFTs traded within a certain period. The graph below shows the distribution of NFT categories in the weekly sales leaderboard.

It can be seen that BAYC dominates the NFT trading leaderboard. Over 85% of high-priced trades in the past week came from BAYC. Following BAYC is CryptoPunks, accounting for approximately 3% of the total. BAYC's dominance is both bearish and bullish for itself.

We found that investors are trying to buy BAYC in the bear market. While the buying volume of other projects remains relatively quiet, BAYC continues to dominate the real-time leaderboard for high-priced NFT trades.

However, the question that follows is, what is the cost for these holders selling high-priced blue-chip NFTs? We first studied the average profit and loss of the top 200 trades from the past week. To further illustrate the impact of the decline in ETH prices on market valuations, we also plotted the profit and loss (PnL) in both ETH and USD denominations, calculated by subtracting the selling price from the buying price.

The data shows that while the average profit in ETH terms is high, the profit in USD terms is either negative or minimal compared to the generally positive returns in ETH. This is a concerning signal for all NFT holders, as it indicates that some holders are willing to incur additional USD losses to liquidate their NFT assets, and "panic selling" is generally one of the main signals of an impending winter.

Blue-Chip NFTs VS ETH

The USD prices of many blue-chip NFTs have been synchronously declining with ETH prices. As shown in the table below, the average selling prices of NFTs denominated in both ETH and USD have seen significant declines.

The activity of whales and the blue-chip NFT index over the past month indicate that whales are slowing down their trading activities in NFTs. Whales are the most capitalized players in the NFT market, driving market liquidity and most large-scale trading activities. As the number of active whales diminishes, the NFT market also begins to decline. The graph below illustrates the changing trends of the blue-chip NFT index and the number of active whales over the past month.

With ETH against USD also depreciating, the blue-chip NFT index in ETH terms has at times underperformed its USD counterpart.

Blue-Chip NFTs VS BTC

We have converted some blue-chip NFTs into USD and compared their recent trends with BTC.

During the gradual decline of BTC from March 27 to May 1, the trends of blue-chip NFTs can be mainly divided into two categories. NFTs represented by BAYC and Azuki did not follow its trend but initiated independent trends, with some NFTs even continuing to rise, such as BAYC by 9%, Meebits by 29%, and Azuki by 54% (in USD terms), while others such as Cool Cats and CloneX followed the downtrend of BTC.

After May 1, most blue-chip NFTs began to decline more than BTC, and those NFTs with independent trends started to catch up with the downward trend. From May 1 to May 10, BTC saw a decline of -19%, while BAYC declined by -42%, CloneX by -32%, Meebits by -43%, Azuki by -78%, and Cool Cats by -39%.

In the recent downturn, most blue-chip NFTs have started to follow the trend of BTC and have amplified the decline. From June 5 to the present, BTC has seen a decline of -25%, while BAYC declined by -49%, CloneX by -57%, Meebits by -54%, and Azuki by -49%.

Therefore, USD-based blue-chip NFTs exhibit two interesting characteristics in this bear market cycle: some blue-chip NFTs will break out independently against market trends but will accelerate their decline afterwards, and some blue-chip NFTs have started to follow the trend of BTC and have amplified the decline.

The Future of Blue-Chip NFTs

Blue-chip NFTs are some of the most valuable collectibles in the NFT ecosystem. Even if you are not planning to invest in blue-chip NFTs, it is essential to keep an eye on the dynamics of these projects. Our data shows that the blue-chip NFT index is closely related to the total market value of NFTs.

The blue-chip index records the value of these NFT projects, while the NFT market value represents the total value of the NFT ecosystem. The graph below shows that these two indicators overlap significantly.

This article has discussed how blue-chip NFTs are affected by the bear market in the cryptocurrency market. The NFT market is one of the most promising new industries, and blue-chip NFTs also have great potential for future growth. Besides the speculative cycles and bubbles currently experienced, NFTs still have a long way to go to fully demonstrate their value in the market.

We have been researching the latest trends in the NFT market and keeping an eye on the latest trends. This is the first article in our bear market series analysis report. Stay tuned for more updates. You can also monitor the latest data in the NFT market in real-time on the NFTGo website.

Note: This article is for research purposes only, and the views and opinions expressed are solely those of the author and do not necessarily reflect or represent the views and opinions of NFTGo.io. Investing in digital assets (such as NFTs and cryptocurrencies) involves risks, and before making any investment decisions, be sure to consult a financial advisor. NFTGo does not provide investment advice and is not responsible for any losses incurred due to investing in digital assets.