NFTs: Declining Volumes will Clear up Doubts
After the frenzy of the past few weeks, figures are now starting to emerge from the transition between the physical and the digital worlds
Good better best, never let it rest, until good is better, and better best.
(St.Jerome)
Two events have occurred in recent days that are destined to leave an important mark on the history of cryptocurrencies: the direct listing of the Coinbase exchange on the world's largest technology market, Nasdaq, and the auction organized by Sotheby's on the Nifty Gateway platform of some NFT-certified digital works by the anonymous artist Pak. The latter was an event where, like a live Twitter sports commentator, the artist himself followed the bidding and entertained his followers. Although the numbers were lower than at Christie's Beeple auction, Pak's works raised a total of $16.8 million. Despite the cool down of the NFT market over the last two weeks, the size of the digital Eldorado has continued to attract the attention not only of insiders, but also (though increasing the risks for both sides), pseudo-collectors and artists who are increasingly being lured by the abundance of a unique investment. What is emerging, in a moment of total speculative hysteria, is the certainty that many (even among the new gurus of non-fungible tokens) still do not fully understand the difference between the digital certificate and the linked work. In 2020, the entire NFT market had about 75,000 users who had purchased a certificate linked to a digital file, which could be a jpeg or a virtual good. Half of the sales last year - according to a report by NonFungible - were of tokens linked to video games. Of these, 8% referred to the metaverses, so-called virtual worlds in which participants can purchase land and virtual goods. Only 5% of the total turnover was in artworks, most of which were sold for less than $100. Today, although the frenzy has abated, the average price of a work has fallen from $4,000 (mid-March) to around $1,500, the numbers are still more than 15 times higher than a few months ago.
Among the major NFT collectors, the name WhaleShark is among the best known. Considered to be on a par with a Midas King of digital time, he is an anonymous British-born cryptocurrency expert who as early as 2012 earmarked half his salary to buy bitcoin, later doing the same thing with Ethereum in 2015. In 2019, he started buying his first NFTs, accumulating around 210,000 to date. Many of these represent moments from video clips on the NBA Top Shots platform. WhaleShark himself estimates that he has spent around $150,000 and to date the same collection is worth around $53 million. He recently stated "Our lives are shifting from physical to digital. Only 0.01% of the mass market today is providing liquidity to the NFT zone. In fact, I believe that 99.9% of the projects being released today will not hold any real value".
These words should serve as a warning to those who risk the emulation effect today.
Decentralized Finance
At an average of about $2.5 billion per day, trading volumes on decentralized exchanges (DEX) are back on the rise, adding up to more than $17 billion over the past seven days. This is an increase of about 50% on a weekly basis. This is the second week with the highest volume spike ever, second only to the last week in February when total volumes exceeded $18.5 billion.
Uniswap consolidated its leadership by once again trading over $1.2 billion daily and over 205,000 unique users using the decentralized trading protocol. This is the highest peak of traders ever. The record-breaking numbers are also reflected in the value of the UNI token, which this week is close to $40 USD for a total capitalization of over $16 billion for the one billion governance tokens distributed last September. UNI has grown 750% in value since the beginning of the year and more than 2000% since its November lows. If the trading volumes of DEXs remain stable over the next two weeks, April will maintain the average trading volume of the first quarter of 2021, closing above $70 billion.
The Total Value Locked (TVL) in DeFi continues to grow, reaching nearly $60 billion for the first time. Since the end of February, the value of the collateral locked on decentralized finance projects has doubled. The first three protocols are all lending and financing projects, which account for 45% of the entire market. The Compound project was the first to reach more than $11 billion, followed by Maker.
Non-Fungible Tokens
In a week that saw a slight slowdown for the CryptoPunks marketplace (-8.8% WTD) with a total of more than $25.5 million, transactions (355,700 tx) and total turnover (+44%) rose again for the NBA Top Shot platform with $22.2 million traded.
Digital collectible cards remain the most traded items. CryptoPunks continues to take the lion's share of the market, with three rare images in the top three for the highest selling price over the past week. Zombie #2484 sold for 480 ETH, which is worth over $1 million. In the past four months, the image has changed hands twice, appreciating more than 13 times in Ether, or more than 5000% in USD.
Among the animated 3D images, artist MrMisang's 'Money Factory' sold for the highest price on SuperRare for 206 ETH, equivalent to $520,382.78 USD.
Of the artworks by anonymous digital artist Pak, sales of more than $16.8 million were generated during the two-day event organized in collaboration with Sotheby's auction house and held on the Nifty Gateway platform. The auction of the open image of a cube, called Cube and consisting of more than 23,598 cubes in eight levels, lasted three days and generated approximately $14 million in sales. The unique work 'The Pixel', so called because it is made up of a single grey pixel, after two days of few bids saw the battle heated up in the final hour with the last bid by user '33' for $1,355.555
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Technical Analysis
Bitcoin (BTC)
Yesterday, Sunday, April 18th, after about three months, the price of Bitcoin broke the dynamic bullish trendline (1) that was accompanying the upward climb and which a few days ago recorded its all-time high just a step away from 65,000 USD. Since the lows of late January, the price of Bitcoin has doubled its value from 30,000 to 64,800 USD in 77 days. Over the past week, Bitcoin's numbers have set new records not only for prices but also the volume traded for the spot and derivatives markets. With $21.7 billion traded on Sunday, April 18th was the fifth-highest volume traded day ever and the first for volume traded on a weekend or holiday day. Aggregate volume traded in derivatives futures also confirmed that Sunday, April 18th, was the third-highest volume day ever and the highest volume day of the weekend at around $15 billion. Last week, aggregate Open Interest on futures rose above $27.4 billion for the first time since 2017, when futures contracts were launched on major exchange platforms, including the better known CME. Open Interest for options derivatives also rose to a new record high of $14.8 billion for the first time, above the previous all-time high of mid-March, just days before the month-end quarterly options expiration, the largest to date.
The stop in recent hours shows a loss of 22% from the high of Wednesday, April 14th, to the low of Sunday. Despite the strong bearish movement, this is the third deepest bearish lunge since the beginning of the year. Despite the backward step in recent hours, in light of what has been written above, it is likely that this is a decline created by short-term bearish speculation and not the beginning of a long-term bearish movement. To understand this more clearly, it is necessary to wait for the trend of the next few days to assess the holding of the technical support identified in the area 53,900 USD (2) or the psychological support of 50,000 USD (3) which in the last four weeks has twice repelled the attack of the Bears.
BTC Options
The decline that developed between Saturday and Sunday confirmed the hedging positions of the options professionals that I already anticipated in last week's newsletter. After attempting to break through the 64,000 USD barrier on Wednesday, April 14th, the hedgers pushed prices back below this level again in the following days. In the last few hours, the bearish movement has found an important defence in the 50,000 USD area, repelling the speculative downward attack for the time being. Both levels continue to remain the levels to monitor in order to understand the strategies of professional traders. On the upside, beyond the 64,000 USD area, Call options positions have been growing in the 60,000 USD area in recent hours. This is a clear sign of how professional traders prefer to protect the risk of a return of sales and lighten their positions on the upside with futures.
Ethereum (ETH)
The weekend's decline did not spare Ethereum, which suffered a 25% loss in 48 hours before recovering part of the decline. Unlike Bitcoin, Ethereum's technical price structure did not suffer from last weekend's decline. The trend remains bullish with levels above the dynamic supports (1) that have accompanied the rise since late December 2020. This level coincides with the previous February highs (2) as well as being the psychological level of 2,000 USD.
This is the level to monitor in the coming days.
ETH Options
Last week's rise has pushed prices away from the support area of danger in the 1,600 USD region. Professional traders are putting their downside hedges on the 1,900 USD area confirming the importance of the 2,000 USD technical area. On the upside, in the 2,200 area, the strikes chosen to hedge against the downside risk have caused the ratio between Put and Call to take off at 1:14. It will be important to understand in the coming days if a confirmation of the overcoming of prices above 2,200 USD will trigger new purchases of futures or will be a barrier that will reject the rebound underway in these early hours of the week.
SIAE: "We chose Algorand as our blockchain”
A few weeks ago, following the late-2019 announcement of a partnership between Algorand and SIAE, the Italian society of authors and publishers that protects trademarks and songs, came the announcement of the creation of a new NFT platform, the first milestone in a long-term vision.
The Cryptonomist had the chance to interview Matteo Fedeli, Director of SIAE's Music Division, to better understand what the company's intentions are and why it chose the Algorand blockchain.
- What is SIAE tokenizing exactly?
We have a path in mind that is less about creating NFTs and more about recreating onchain, on Algorand, an ecosystem that is now offchain. For now, we have not yet created assets that represent intellectual works, which is what SIAE manages, as we are one step before that. Today SIAE has more than 100,000 members, so 100,000 people protected by SIAE, who have deposited millions of works. In the roadmap we have envisioned, before we could even think about representing the works onchain, we first have to represent the rights holders, since each NFT has to contain within it the information to know who has to be remunerated when that work is used.
So that was our first big step: representing the individual rights for each subject we represented. For each author or publisher, we manage a lot of rights, which can also be categorized by several countries. In total, we created 4.5 million NFTs to represent all the rights of our members.
Step by step we will complete the various stages outlined in the roadmap, with increasing difficulty, with the aim of rebuilding the entire ecosystem, given that in order to work (well) it must be all onchain, not just part of it, otherwise we will find ourselves inexorably at the impasse of having to trust information born and managed offchain. This is the only way it makes sense: by having all the fundamental metadata directly on a blockchain.
After uploading the information on rights holders, it will be time to register all works and records onchain, i.e. also all recordings made by different artists but related to the same intellectual work.
- What could be the use cases of this system? What problems could having everything on the onchain solve?
After all this, we can finally have a link to the information managed by the DSPs (Digital Service Providers) on which records are uploaded. Having all the metadata on records, intellectual works and rights holders onchain would in theory allow us to know whose money is generated by that single stream, through the "simple" application of smart contracts.
Blockchain will allow for more efficiency, gradually replacing the current ecosystem, providing greater security and transparency by design.
In addition, another great advantage could be to overcome the current oracle role of the DSPs, which are the only ones today to manage the information of the "playcount" of a certain piece. The next step will be to be able to ask - with a strong push from the market and perhaps from supranational bodies - to manage this data onchain. At that point, the journey of copyright can finally be transparent end-to-end.
All this will probably take a few years (3, 5?), but Nokia's case should remind us that sometimes technological progress surprises even the best ones. Only four years passed between 2007 and 2011...
- Have you thought about how this fully onchain system could solve the problems of fighting piracy?
Yes, though obviously it will take some time here too. The problem nowadays is certainly also related to formats. An mp3 file can be taken and copied indefinitely, and each copied file can be played indefinitely. In the future we might see an mp(27?) format, which has the data to play the song in high definition but which is cryptographically protected, so it can only be listened to by those who have the private key. For example, my app makes a request to a blockchain-based infrastructure to play a song. If it has the permissions (e.g. a valid subscription for that playback context), the infrastructure can give the OK to the playback by sending a private key and, at the same time, the direct routing of the remuneration of the rights holders of the reproduced work can also be triggered, directly to their wallet.
- Why does SIAE want to achieve decentralization, is it not afraid of losing control of the system?
The interesting thing is that SIAE can do all this because, being a non-profit organization, it is not afraid to research a way to decentralize all these operations, and not be in total control of them.Certainly other intermediaries, such as Booking, Airbnb or Uber, for instance, would find it more difficult to do so because - rightly - they aim to gain from the control and management of information.
- Why did you choose the Algorand blockchain?
First of all, many claim to be experts in blockchain, but to be an expert in the blockchain you have to be an expert in cryptography and Professor Micali - who won the Turing Prize -is certainly a guarantee in this respect. .
In addition, a blockchain like Algorand that uses Proof of Stake has the ability to not consume so much energy and to be particularly scalable. These are key features if you aim to handle millions of onchain transactions..
We are not married to Algorand's infrastructure, but we chose it out of the various solutions that the market offers today, as it seemed to us to be the one that would ensure that we could best develop our business.
Overall, we see Algorand as our Amazon Web Services for blockchain, a technology provider that serves as an enabler to develop our business.
That's why we didn't want to create our own dedicated blockchain, just like I don't want to create any infrastructure to get services that Amazon Web Services can provide me, managing them much more efficiently than we ever could and with incredible scalability.
In a nutshell, Algorand is the market solution that to date gives us the most assurance that we are investing in something that is most likely to remain as a market benchmark for the foreseeable future.
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