If prices plummet in an illiquid market, how soon before anyone notices?
While expendable tokens traded on centralized and decentralized exchanges have significant transparency regarding price movements, non-fungible tokens can be more difficult to track. Due to their illiquid nature, it can be difficult to gauge the general market market sentiment for a project – a dynamic who has led one eGirl Capital member, Mewny, to copy NFT fixes ‘silent crashes’.
I really love @ mr formulating an NFT crash as a “silent crash”
in liquid markets you see prices falling every day. in NFT land, sellers have a slower “market response”. instead of sellers adjusting prices down every day for a month, it can be as little as -80% “ overnight ”
– tuba (@ 0xtuba) March 26, 2021
In a silent crash, speculators may not even realize one is going on – buyers just evaporate and sellers fail to move their wares. However, metrics such as ‘floor price’ – the lowest price at which an NFT can be purchased for a given project – and total volume can indicate that a bull is turning into a bear.
There could also be some bad news on the horizon for NFT collectors as signs point to a nasty crash in progress.
At CryptoPunks, one of the earliest and most popular collector NFT projects, the bottom price is down more than 40% to 14 ETH (about $ 28,000 at time of publication). The price boost has led to some horror stories on the chain today, such as one speculator who sold a punk for 16 ETH after buying it for 25.5, and another who sold for 27.99 after buying 42 ETH:
– CryptoPunks Bot (@cryptopunksbot) April 3, 2021
CryptoPunks aren’t the only high-profile project going through a market-wide correction, either. Data from evalu.market shows that sales volume across multiple price points for NBA Top Shot has plummeted since a peak of Feb. 22.
A semi-anonymous and self-described Top Shot aficionado, Jordan, who charted the downturn, points to two specific populations for the steep fall.
“The market has been on a downward trend since February 22nd. It seems there are two types of sellers. First, the investor who got in early and wants to cash out with exponential profit. Second, the investor who bought at or near the top and is afraid to see his investment lose value by the day, ”he said.
– ☄️☄️☄️☄️ (@jfresshhh_) April 3, 2021
It’s hard to see how price floors fall, regardless of the project. According to market tracking website Nonfungible, the pullout is affecting the entire market: the total number of sales, the total value of the sales, and the active wallets are all down on a 7-day, 30-day basis.
However, Jordan ultimately views this as a healthy short-term relapse.
“I think it is a healthy correction in the relatively short term. The rate at which prices rose from January 1 to February 22 was unsustainable. I think the coming months will remain bumpy, but I am generally very optimistic. “