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It seems that there may be an inverse correlation between the memecoin market and that of NFTs, with the prices of these two types of assets moving in opposite directions.
In particular, the memecoin market could at this moment be the cause of the strong suffering of the NFT market.
Summary
The drop in NFT prices: is it the fault of the memecoin market?
Comparing the trend of the last few months of the memecoin market with that of NFTs, there actually seems to be an apparent inverse correlation.
Using the chart of monthly NFT sales volumes from CryptoSlam, it is noted that starting from June 2022 there has been a real collapse.
Since then, the lowest point was recorded in September 2023, with only 300 million dollars in monthly trades.
In particular, after a brief and contained peak in December 2023, during 2024 the daily trading volumes of NFT remained above 25 million until April, then plummeted between May and June to just over 10 million.
In fact, the monthly trading volume for the recently concluded June was only 462 million dollars, which is much less than the 1.7 billion of December 2023.
In other terms, the monthly volumes over the course of the year went from 1.7 billion dollars in December 2023 to 462 million in June 2024, with an almost constant decline of 74%, concentrated mainly in the last two months.
The memecoin market pushes NFT prices down
Many memecoin instead in 2024 have performed well.
Taking as a reference the gains or losses from December 31, 2023, for example, Dogecoin is at +40%, Shiba Inu at +66%, Pepe even at +725%, and Floki at +363%.
Even the new WIF (dogwifhat) has recorded a sensational +1.300%, while Bonk stops at +77%.
These numbers as a whole seem to indicate a possible capital flight from the NFT market to that of memecoins.
However, if only the last 30 days are taken into consideration, the inverse correlation does not seem to be there.
The market prices of all six major memecoins in June lost between 21% and 35%, with overall movements decidedly similar to each other.
The monthly trading volumes on the NFT market in June decreased by 25% compared to those in May, which is a decline of the same order of magnitude as the prices of memecoin.
Prices and volumes
However, one should not compare prices with volumes, because they are two different things.
However, it is possible that a decrease in NFT sales volumes corresponds to a decrease in prices, given that volumes are calculated by multiplying prices by quantities.
So if on one hand there doesn’t seem to be a direct correlation, the circulating hypothesis is that in the second quarter of the current year, taken as a whole, a wave of new memecoins on VIP, politics, and animals may have diverted capital from the NFT market, and the decline of the crypto market did the rest.
It is worth noting that the overall volumes of the NFT market in June were even lower than the lowest monthly peak of 2022, the year of the bear-market, and this suggests that there might be a sort of delay between this market and that of the memecoins.
On the other hand, for example, the historical peak of the monthly trading volume of NFTs was recorded in January 2022, a good two months after that of the crypto market.
The hypothesis of the co-founder of Animoca Brands
In a recent interview the Co-Founder and Executive Chairman of Animoca Brands, Yat Siu, stated that he believes the NFT market could recover.
He stated that a new speculative bubble should not be necessary to see this market recover, because NFTs can also be used in games, for intellectual property rights, and for many other things, and this could generate demand.
From his words, however, it is clear that the boom in the NFT market has already occurred, and there do not seem to be the conditions for a new true and proper boom in the short term.
On the other hand, however, he considers it illogical that the monthly trading volumes are so low, blaming it mainly on the summer period. In fact, he believes that when market activity resumes, more volumes, trades, and activity will be seen.
This hypothesis could also explain why even the main memecoins performed poorly in June.
The recovery of the market
A recovery of the memecoin market, after the general decline in June, is expected by many.
It is not certain that the usual memecoins will always perform well, as new ones are constantly being created that sometimes manage to make a splash and attract capital that does not flow towards other memecoins.
It is also possible that during periods when memecoins – especially new ones – attract a lot of capital, this is also drained from the NFT market, and it is possible that summer is not a particularly brilliant period for financial markets as a whole.
For example, even in June 2021 there was a drop in the monthly volumes of NFTs, but in July there was the first big boom. June 2022 was a bloodbath, but there had been the implosion of the Terra/Luna ecosystem. In 2023 the drop lasted for a full eight consecutive months, from March to October.
All this makes it possible to imagine that sooner or later this market may recover, even if perhaps, as Yat Siu says, we will have to wait for a broader and more massive use of NFT technology even beyond the art market.