Is this the end of NFTs?

Floor Protocol
5 min readJun 19, 2024

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In recent weeks, notable blue-chip NFTs have been declining in value drastically. Several factors are contributing to this downturn, creating significant shifts in the NFT market as we approach the end of Blur’s Season 3 on June 26th.

On May 16th, Blur announced the timeline for their airdrop and the end of Season 3, set for June 26th. With just seven days remaining until this significant date, the NFT market is experiencing major changes. The decline in blue-chip NFTs is a key indicator of the broader market challenges currently unfolding.

A primary factor in this downturn is the large-scale dumping of NFTs into bids by farmers as the farming season comes to an end. This sudden influx of NFTs on the market has led to a significant drop in liquidity, causing market participants to reassess the value and liquidity of their NFT holdings. Moreover, farmers are also starting to remove their bids, further exacerbating the liquidity issues.

Another significant factor is the recent action of Cbb0fe, a prominent participant in the Blur ecosystem, who has withdrawn all his bids and loans. This move has further compounded the liquidity issues, adding to the broader sell-off and the realization among holders about the illiquidity of their assets.

Additionally, a HUGE number of loans are currently underwater. If borrowers choose to default, which is likely, this will lead to further market instability and downward pressure on NFT prices. The looming threat of mass defaults is a crucial factor in the current market sentiment.

Pudgy Penguin outstanding loans
BAYC outstanding loans

Holders are also coming to terms with the illiquidity of their NFTs. Moving NFTs in the current market has proven to be challenging, as active bids are scarce. This realization is prompting many to reconsider their strategies and the inherent risks of holding illiquid assets.

Furthermore, the recent memecoin meta has shifted the mindset of many investors. The allure of the next 100x return from memecoins is diverting attention and funds away from NFTs. This shift is contributing to the declining interest and liquidity in the NFT market.

Another concerning thing to note is that the number of Ethereum NFT traders has fallen below 4,000 for the first time since June 2021, hitting an all-time low. This decline in active traders further underscores the waning interest and liquidity in the market.

Source: https://x.com/TheBlockPro__/status/1800901286075773296

Currently, there is no clear support level for these NFTs, which adds to the uncertainty. However, it is expected that at some point, organic buyers will step in, recognizing value at lower prices and providing some stability to the market.

This situation highlights a critical aspect of the NFT market: its inherent volatility and the importance of liquidity. The removal of significant bids has exposed the market’s vulnerability, leading to a broader sell-off and a stark realization among holders about the illiquidity of their assets.

Another area of concern is BendDAO, a decentralized lending platform. Those lending ETH on BendDAO should consider taking precautionary measures, including withdrawing their funds. There are reports of the oracle system malfunctioning, which could lead to inaccurate asset valuations and potential risks for lenders.

“Oracle is completely broken, and this might become really ugly.” — CBB

This period serves as a crucial price discovery phase for NFT collections. The market is adjusting to new dynamics, where the liquidity once provided by major participants is no longer guaranteed. This adjustment is a reminder for NFT holders of the speculative nature of their assets. Without active bids, the perceived value of their NFTs can drop significantly, highlighting the challenges of maintaining liquidity in the market.

The next few days will be pivotal as the market adapts to these changes. The end of Blur’s Season 3 may mark a turning point in the NFT market’s evolution, emphasizing the need for more robust mechanisms to ensure liquidity and stability.

As the NFT landscape changes, here’s some food for thought:

  • Is this the end of NFTs, or the start of a new chapter?
  • Will a new influx of users and capital revitalize the market?

404s could solve liquidity problems by providing a more stable trading framework. The future is uncertain, but the NFT community’s resilience will be key. Will 404s be the future of NFTs?

ABOUT FLOOR PROTOCOL

Floor Protocol is an NFT marketplace, aimed at helping web3 enthusiasts discover, buy, and collect rare NFTs. Through its $FLC Index Token, Floor Protocol offers investors simplified entry into premier NFT collections. Additionally, with the introduction of μTokens, investors are able to fractionalize their high-value assets, putting more utility in the hands of the holders.

For more information about Floor Protocol or if you have any enquiries, please contact us at support@flooringlab.com

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