The number of NFT minted on Ethereum has dropped 79% since the beginning of the year.
This is what an on-chain analysis conducted by TradingPlatforms a few days ago reveals.
The report shows the daily chart of new NFT minted on the Ethereum network, which shows that in January they averaged more than 10,000, while in August they dropped below 3,000.
The long decline of NFT on Ethereum
Even more glaring is the comparison with 2022, as the highest peak of NFTs minted in a single day on Ethereum, dating back to 2 June, was as high as nearly 470,000.
Excluding the single daily peak on 2 June, an average of about 350,000 new NFTs were minted every day from late May to early July last year. But by late July they had already plummeted below 50,000, and by August below 30,000.
Since then the decline has been almost continuous, except for a brief spike in mid-September.
In the past twelve months the minting of new NFTs on Ethereum has shrunk more than tenfold, from just under 50,000 to under 3,000.
Current levels are similar to those of February 2021, which is when the bull run of NFTs was just beginning.
It is worth noting that between July and August 2019 there were almost twice as many new NFT volumes as there are today, although at that time there was still no bull run in the NFT market, and it was still far from coming.
Therefore, the one in 2023 is not just a normal post-bubble slump, but a real historical drop in NFT creation.
The analyst’s comment
The financial analyst at TradingPlatforms, Edith Reads, commented on this analysis saying:
“It’s difficult to determine the exact cause of this decline, but it’s likely due to a combination of factors. These include increasing competition from other blockchain networks entering the NFT space, market uncertainty caused by volatility in crypto prices, and saturation of supply relative to demand.”
In other words, these would be causes external to Ethereum, but internal to the crypto industry and the NFT market.
It is certainly true that until at least 2020, Ethereum had almost no competitors in this area.
Moreover, one of its main competitors, Polygon, is its own layer-2 solution, thus not a real competitor aiming to take users away from Ethereum.
On the other hand, however, it is also true that Ethereum has many competitors now as far as NFTs are concerned, starting with Solana.
The data reported by TradingPlatforms refer only to Ethereum.
However, one should not make the mistake of believing that when it comes to other blockchains the number of new NFTs minted daily is growing. In reality they are all declining somewhat, and it is very possible that the overall number including all blockchains is also in decline.
Moreover, the year of the largest expansion of competition was 2022, so the decline in NFTs minted on Ethereum in 2023 is only partly due to competition.
The crypto bear-market
For sure, a greater role was played by the crypto bear-market.
Indeed, the less gains there are for those trading in the crypto markets, the less funds there are to buy NFTs.
However, it is worth mentioning that the crypto bear-market began in late 2021, and had its first bottom precisely in June 2022.
At the same time, June 2022 was by far the single month in which the most NFTs were created on Ethereum ever, and this jars somewhat with the assumption that the bear-market is the reason for the decline in new NFTs.
Moreover, since January 2023 the crypto market has recovered, while the creation of new NFTs has continued to fall.
Probably from this point of view the bursting of the speculative bubble in the NFT market counted more than the crypto bear-market.
The lack of demand for NFT on Ethereum and competing networks
Perhaps the single biggest reason is precisely the saturation of supply relative to demand.
One should not forget that NFTs created and sold on the primary market eventually end up on the secondary market, and there they also stay forever.
The creation of new NFTs is useful to be able to feed the primary market, but for the secondary market it is not necessary.
On the contrary, it is possible that with the bursting of the speculative bubble in the NFT market, a real saturation of supply was reached in the secondary market, given also the declining demand.
This may also have had an indirect impact on the primary market, resulting in a collapse in demand for new NFTs.
It is important not to forget that on OpenSea, i.e., the most historic and important NFT marketplace there is, trading volume dropped from nearly $700 million in June 2022 to $161 million in June 2023, and in July it still fell below $130 million.
Clearly, the lack of demand started to get heavy, and this ended up affecting the primary market as well.
Now the question is, will this market recover? And when it does, how far down has it gone in the meantime?