If prices fall in an illiquid market, when will they be noticed?
While the exchangeable tokens that trade on central and decentralized exchanges have great transparency about price movements, tracking irreplaceable tokens is more difficult. Due to a lack of liquidity, it can be difficult to gauge market sentiment for the enterprise as a whole – such dynamics have led eGirl Capital member, Mewni, to call NFT solutions “silent errors”.
In a silent crash, the speculators may not realize this is happening – the buyers evaporate and the sellers cannot move their goods. However, calculations such as “floor price” – the lowest price at which the NFT can be purchased for a given project – and total volume can indicate that the bull has become a bear.
There could also be bad news on the horizon for NFT collectors, as the signs point to an ongoing dangerous breakdown.
In CryptoPunks, one of NFT’s oldest and most popular collector’s projects, the floor price has dropped more than 40% to 14 ETH (about $ 28,000 at time of publication). Today’s price capitulation has led to some horror stories on the network, such as one speculator who sold Punk for 16 ETH after buying it for 25.5, and another for 27.99 after buying 42 ETH:
CryptoPunks isn’t the only high-profile project that is undergoing a patch in the market. Data from the Rating Market shows that NBA Top Shot sales across several price levels have fallen sharply since the peak on February 22.
Jordan, a half-century enthusiast for Top Shot who is mapping the recession, points out that there are two specific groups of the population in sharp decline.
Since February 22nd, the market has had a downtrend. There appear to be two types of vendors. Firstly, an investor who came early and wanted to withdraw funds at huge returns. Second, an investor who has bought at a high point cannot see his investment losing value every day.
It is difficult to see price levels falling regardless of the project. According to the Nonfungible Market Tracking website, the drawdown is affecting the entire market, with total sales, total sales value, and active portfolios dropping on a 7-day and 30-day basis.
However, Jordan sees this as a short-term health withdrawal.
“I think this is a relatively short-term health correction. Inflation from January 1 to February 22 was unacceptable. I think the next few months will still be uneven, but I am generally optimistic.”