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Meta Exits NFT Scene Despite Market Activity Flashing Mild Recovery Signs

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Social media giant Meta on Monday pulled the plug on its digital collectibles’ initiative supported on Facebook and Instagram, barely a dozen months since it pledged its commitment. The decision to move away from this space comes against a recent trend of increased participation by individual collectors and creators as well as institutions invested in the sector. The non-fungible tokens (NFTs) niche appeared to tease a positive bounce earlier this year, reflected in swelling sales and transaction volumes between January and February.

Meta winds down NFT initiatives on its social platforms

In a Mar 13 tweet, Meta's Commerce and FinTech executive, Stephane Kasriel, shared news of the company cutting off support for efforts centered around NFT in favor of exploring other Web3 business ideas. The tech firm first began testing the integration feature on Instagram by allowing US-based creators to share their NFTs on the social media platform before extending the product to Facebook in June. Instagram users in other countries also got access to the NFT tool after it was made available outside in July. Through its Polygon-supported NFT marketplace, Meta also allowed users to mint NFTs on Polygon and sell them directly on the social platforms in November.

Meta's resolve to retreat from this niche strikes as a ceding to with shaky market as Bitcoin and other crypto tokens manifest price volatility following a battering resulting in dull performances across 2022. The depressed market was occasioned by a cocktail of bearish developments, including the ripple effects of the collapses of the Terra ecosystem in May and the FTX exchange later in November. The unfolding downfall of crypto-focused banks this month has aggravated the situation, introducing more uncertainty and fear about the industry's future.

Ditching NFTs integration is plausibly another measure by the tech giant to cut costs while delivering on its innovation objectives. Thus far, several of the firm's crypto-related projects have been shelved, including the digital wallet offering, Novi, whose pilot program it shut down last July. Last week, the Wall Street Journal reported that Meta plans to lay off more employees and could announce more rounds of staff cuts in the coming months. More products and services are expected to be casualties, according to the Mar 10 WSJ report. The Washington Post confirmed the same, reporting that the multi-phase downsizing in March would affect the recruiting division. Other technical and non-technical roles will then be targeted in the coming months.

To learn more about Polygon, check out our Investing in Polygon guide.

NFT Market Overview

Contrary to an exodus, more non-native brands have shown interest in foraying into the space, which, too, has advanced to welcome competition among marketplaces. The dominance of OpenSea has been challenged by the Blur NFT marketplace, which launched in Oct 2022 but has thrived in recent weeks. In addition to these narratives, the hype of the newly introduced Ordinals on Bitcoin has contributed to a slight recovery in NFT activity.

Yuga Labs marks auction of Ordinals-inspired NFT collection as a success

Last month, Yuga Labs took on the Ordinals craze on the Bitcoin blockchain, launching a new Twelvefold collection. Making the revelation via a teaser on Twitter, Yuga said the contentious offering would have 300 pieces, much more limited than other NFT drops it has done in the past. The Bored Ape Yacht Club (BAYC) creator explained that the “base 12 art system localized around a 12×12 grid” collection was crafted in-house by Yuga Labs' art team using various advanced techniques such as 3D modeling, algorithmic construction, and high-end rendering tools. Except for the dozen items set aside by Yuga Labs, the rest of the pieces sold in less than 24 hours, netting $16.5 million.

Blur's rise gives OpenSea a run for its money

With a strategy focused on traders and liquidity, the newfound resurgence for the NFT marketplace Blur has scaled its dominance, pinching market share from the leading platform OpenSea.

NFT volume (90-days)distribution chart. Source: Dune Analytics

Blur has continued outperforming OpenSea despite the latter's figures in the last two weeks suggesting it is gradually recovering. Dune Analytics data shows that Blur marketplace account for the majority (61.1%) of the NFT volume distribution, followed by OpenSea, which makes up just over a quarter. Blur has also consistently recorded a higher average number of trades per user than any other top marketplace since mid-February. OpenSea still dominates in user and sales distributions during the same period.

NFT volume distribution chart

Following the launch of its BLUR token, Glassnode observed in an issue of its Weekly On chain newsletter that Blur had gained nearly 35% in market share while OpenSea's has declined in nearly the same measure. Blur's unique strategy modeled around pro traders has borne its success. The market data and analytics firms noted that this higher sales frequency on Blur's platform creates a positive feedback loop where more NFT sellers feel confident to list their items, leading to a more extensive offering, which in turn attracts more buyers.

 

Token Terminal data further shows that trading activity on OpenSea has slumped since mid-February. The platform's daily and weekly NFT trading volume figures have traced a consistent decline. The 7-day trading volume for OpenSea was at writing $90 million compared to Blur's $314.8 million.

Top projects in NFT marketplaces

While a larger NFT sales size does not necessarily guarantee better profitability for sellers, it can be attributed to generally higher-priced offerings. A closer examination of the sale sizes on both marketplaces reveals that Blur's strategy creates a more lucrative environment, with sales ranging from 0.3 to 1.3 ETH. In comparison, sales on OpenSea have consistently averaged around 0.2 ETH for several months.

OpenSea addresses a legitimate vulnerability raised by cybersecurity firm

OpenSea earlier this week fixed a loophole on its platform that could have been exploited by malicious actors to deanonymization of OpenSea users and obtain their identities. Cybersecurity solutions provider Imperva discovered the ‘cross-site search vulnerability' on Mar 9, noting that its root cause was “misconfiguration of the iFrame-resizer library” used by the marketplace. OpenSea's team scrambled to release a patch to the same, which implements by restricting cross-origin communication. Notwithstanding its popularity, OpenSea's security has been brought up several times. The marketplace was exploited in Feb 2022, resulting in $1.7 million worth of NFTs being stolen from users' wallets. OpenSea's Discord channel was also affected by another vulnerability barely three months later.

Blockchain performance

Ethereum and Solana have retained their respective first and second rankings in NFT sales volumes by blockchain (in the last 30 days) despite tracking a decline in NFT sales and the number of transactions. In the case of Ethereum, the dominant chain by this metric, NFT sales have dropped by roughly 11% in the last 30 days to $734 million as of writing. Solana has recorded a drop of 38% in the same period and is second with $75 million, as per CryptoSlam data.

Polygon NFT sales chart. Source: Crypto Slam

In contrast, Polygon NFT sales have swelled by 52% to $35 million, and NFT transactions increased by 37% during this period. The number of buyers has more than doubled to 105,000 – only bettered by buyers of Ethereum NFTs. Overall, the NFT niche appeals as an interesting watch for enthusiasts going into the second half of the month.

To learn more about Ethereum or Solana, visit our Investing in Solana and Investing in Ethereum guides.

Sam is a financial content specialist with a keen interest in the blockchain space. He has worked with several firms and media outlets in the Finance and Cybersecurity fields.