Hello! Welcome back to Distributed Ledger, our weekly crypto newsletter that reaches your inbox every Thursday. I’m Frances Yue, crypto reporter at MarketWatch, and I’ll walk you through the latest and greatest in digital assets this week so far. Find me on Twitter at @FrancesYue_ to send feedback or tell us what you think we should cover.
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Non-fungible tokens, or NFTs, which refer to non-interchangeable digital assets stored on a blockchain, are seeing the boom continue, while the overall crypto market has been sluggish over the past few weeks. Major cryptocurrencies have seen losses over the past seven days, though most traded up Thursday.
The largest NFT marketplace OpenSea, which usually takes up more than 90% of the total NFT trading volume, saw its transaction volume on the Ethereum blockchain surpassing $4 billion so far in January, on pace to record its highest monthly volume in history, according to data from Dune Analytics.
“I think just in general, NFT is kind of uncorrelated with the greater digital asset space,” Eric Chen, co-founder of Injective, a decentralized exchange protocol, told Distributed Ledger in an interview.
Major cryptocurrencies, especially bitcoin, have been lately trading in tandem with stocks facing macroeconomic uncertainties, while NFTs are attracting growing mainstream attention, as companies and celebrities roll out their own NFT collections.
Most recently, Twitter launched a verification mechanism for NFT profile pictures available to some users.
Meanwhile, trademark filings show that retail giant Walmart is looking to create its own cryptocurrency and non-fungible tokens in a push into the metaverse. Gap Inc. recently launched NFTs of digital hoodie art, following Nike, Adidas and Macy’s, who already made moves into the NFT space.
Furthermore, NFTs got a boost in popularity when Facebook FB,
“This awareness from mass market brands is driving adoption,” Paul Judge, managing partner at crypto venture capital firm Panoramic Ventures said in an interview. The space has seen more newcomers and also more activities per user, according to Judge.
“On the one side, an NFT is a collectible, so you have people who buy it and hold it for a very long time. On the other side of the asset, you have people who trade it and have different frequencies of trading it similar to the stock market,” said Judge. “You almost have to compare [NFT marketplaces] on one side to Etsy ETSY,
Despite OpenSea’s predominant market share, the platform has been criticized by some for its centralized nature and relatively high transaction fee of 2.5%.
It might in part explain why the recent launch of LooksRare, an NFT marketplace that has a lower transaction fee of 2%, has stirred up some excitement. The platform also distributed 120 million LOOKS token, the native token of the platform, to OpenSea users to attract customers. In addition, LooksRare pays out the daily transaction fees it collected to users who stake their LOOKS tokens to incentivize more usage of the platform.
LOOKS is currently trading at around $6.84, up 14% over the past 24 hours, according to CoinGecko.
The mechanism seems to be effective. On Wednesday, LooksRare recorded a daily transaction volume of more than $800 million, compared to a daily volume of over $200 million on OpenSea, according to Dune Analytics. However, it has drawn doubts that LooksRare’s volume was inflated by wash trading, as some investors try to manipulate the rewards model by creating repeated large sales.
It will take time to see if the LooksRare’s model works, but the marketplace’s setup shows “how much demand there is from consumers and end users to own a piece of technology and own a piece of the platforms that they’re using every day,” said Panoramic’s Judge.
A representative at LooksRare didn’t reply to messages seeking comments.
Crypto exchanges have also joined the race among NFT marketplaces.
FTX in October launched a marketplace for Solana-based NFTs, while it later added collections of Ethereum-based NFTs.
Meanwhile, more than 3.1 million people have joined the waitlist for Coinbase’s COIN,
Crypto exchanges have their special places in this competition, said Robert Zagotta, chief executive at crypto exchange Bitstamp USA, which is also considering launching a NFT marketplace.
“If you can do more than one thing on one platform, there’s a synergy or efficiency to be had there. Like you can use your crypto holdings to do things in the NFT world and use your NFT holdings to do things in the crypto world either as a collateral or other things,” Zagotta said.
NFT’s are focused on art and unique assets and that category is just beginning, Zagotta added. “The types and breadth of assets that would benefit from unique ownership and transactions are going to obviously continue to increase.”
In crypto-related company trading, shares of Coinbase Global Inc. COIN,
Mining company Riot Blockchain Inc. RIOT,
Overstock.com Inc. OSTK,
Block Inc.’ SQ,
PayPal Holdings Inc. PYPL,
Advanced Micro Devices Inc. AMD,
In the fund space, ProShares Bitcoin Strategy ETF BITO,
Grayscale Bitcoin Trust GBTC,
For the first time since last March, the Nasdaq rose more than 1% and then ended the day down more than 1% on back-to-back days
Frances Yue covers the cryptocurrency market as a Reporter for MarketWatch.