Are ETH NFTs OK?

TL;DR
Many Ethereum NFT collections have been registering declines in price recently, for a number of reasons. Key factors include competition from Bitcoin Ordinals, growing attention on meme coins, Solana experiencing growth, and a hangover from the mistakes of the last NFT cycle. However, there are reasons to be optimistic about the future of ETH NFTs, partly due to the cyclical nature of crypto, along with some big individual NFT sales, teams continuing to build, and plenty of artistic activity.

A quick glance at the charts shows that while the rest of the crypto space is booming, ETH NFTs are currently going through a slump, with ETH-denominated prices down across many collections. So what’s actually going on with ETH NFTs? Let’s look at the reasons for this price activity, and consider what the future might hold.

The Current State of ETH NFTs

First, let’s remember that NFT markets change rapidly, and by the time you’re reading this, the situation may have developed. However, on the whole, the trend is that we’re seeing declines in price across weekly and monthly time frames.

What’s more, this price drop is especially pronounced if we look at the biggest, most famous, and previously most expensive collection, Bored Ape Yacht Club, along with its companion collection, Mutant Ape Yacht Club, which have seen prices drop to below 15 ETH on Bored Apes, and below 2.5 ETH on Mutant Apes.

It’s not only Apes though, with other prestigious collections–including Pudgy Penguins and Azuki–also registering declines. 

Reasons

There are multiple factors that may be contributing to these drops in price, so let’s run through the most significant factors.

Ordinals on Top

A huge difference this cycle, compared to the last, is that we now have Ordinals on Bitcoin. This changes the dynamic a lot, as creators and projects are naturally drawn to inscribing onto the oldest and most valuable blockchain.

The Ordinals ecosystem also benefits from being seen as fresh and novel, and the huge amounts of attention now directed towards the spot BTC ETFs can also act as a positive factor.

Memecoins the Center of Attention

There have been two big stories in crypto over the past few weeks, one is the incredible starting performance of the BTC ETFs, and the other is meme coins.

This latter development–the explosion of interest in meme coins–overlaps directly with NFTs: both are culture-centered, massively hype-driven, and play at the most recklessly degen (but potentially rewarding) edges of the crypto space, but an advantage that meme coins have over NFTs is liquidity, making them easier to trade.

As such, surging meme coin activity may have sucked attention away from NFTs, and if that’s the case, then it’s Ethereum projects in particular that appear to be taking a hit.

Solana Stepping Up

We already mentioned Bitcoin Ordinals, but the other big NFT ecosystem providing competition is Solana, and it has a couple of advantages over Ethereum. Firstly, there is the issue of transaction fees, which are negligible on Solana, but a genuine problem on Ethereum.

And related to this, there is the fact that Solana has become the central network for meme coin gambling while–as detailed above–meme coins have taken center stage. SOL has made a strong recovery from its bear market lows, and though ETH has recovered too, there’s a sense that Solana is now a more complete, battle-tested alternative than it was last cycle.

Last Cycle’s Legacy

The previous crypto cycle included countless excesses and errors in the NFT world, including some insanely high price tags and many undelivered or underwhelming roadmaps. This legacy is, for the moment, attached to Ethereum NFTs from that era, while newer projects, particularly if they’re on other chains, don’t have these associations.

Reasons for Optimism

So is it all over for Ethereum NFTs? That seems unlikely. After all, this is crypto, where narratives can flip overnight and volatility comes as standard, so here are some reasons for ETH NFT optimism.

• Crypto moves in cycles, and sometimes these can accelerate quickly. If low prices bring in bargain hunters, then collections move into the hands of new holders, NFT communities are refreshed, and renewed interest can rapidly spread.
• Despite the lows, there have been some very big individual sales happening, including, this month, an Alien CryptoPunk for a stunning 4,500 ETH, and a Fidenza for 142 ETH. Clearly, there are wealthy collectors still looking to pick up special items, and that suggests lasting demand.
• Whether or not founders and teams are still actively building is an important factor, and support and expansion is, in some cases, definitely happening. Some examples include anime project Renga, which has a new mint upcoming, and Pudgy Penguins, which now produces physical toys. And there’s also Yuga Labs–the creator of Bored Apes–which comes under criticism, but is actively developing its gaming and metaverse product, Otherside.
• One area where Ethereum is a clear leader is in the artistic niche. There’s a wide sweep of art collections based on Ethereum, multiple prestigious platforms for minting and curation, and artists still gravitate towards Ethereum, which has been at the frontier of the art and crypto crossover.
• Crypto attention, currently, is elsewhere, with all eyes on bitcoin all-time highs, ETF flows, meme coins, and catchy narratives such as AI and gaming. However, as gains are made and the cycle progresses, profit rotation is likely, meaning digital flexing and, possibly, flows into NFTs, perhaps triggering interest in established Ethereum collections that have some history behind them.