Nansen Q2 NFT Index Report: Blue Chips Lead the Rebound, Generative Art NFTs Surge

Written by: Nansen

Nansen has built six indices, which are a differentiated basket of NFT projects, tracking the performance of different categories of NFTs priced in ETH. In this report, Nansen analyzes four key insights regarding the NFT indices:

1. Blue chip NFT projects led the price rebound that began in June, but there is insufficient evidence to prove that this rebound trend is sustainable.
2. The analysis of monthly repeat buyers and first-time buyers NFTs on Ethereum shows that market trading of NFTs continues to grow, highlighting the overall development of the NFT industry.
3. Recently, the Blue Chip-10 index underwent a rebalancing, with Chromie Squiggle being included in the blue chip index for the first time, and Meebits returning to the top 10.
4. Generative art NFTs showed the best market growth in June.

Figure 1: Nansen NFT Index Quarterly Performance

Figure 2: Nansen NFT Index Performance (Year-to-date, ending in Q2)

1. Blue chip NFT projects led the price rebound that began in June

The market narrative for Q2 is that we are transitioning from the impacts of inflation and rising interest rates in the macro cycle to recession impacts. Although the last week of June saw a bear market rebound in the crypto market, this upward trend seems to have started earlier in the NFT market. All non-fungible token (NFT) sectors recorded a rebound in June, except for gaming NFTs at the end of Q2 (measured in ETH).

In particular, the performance of the Blue Chip-10 (ETH) index shows that blue chip NFTs led this upward trend as early as June 5, 2022. The Blue Chip-10 index rose by 23.6% at the end of Q2, outpacing the NFT market. In June alone, the Blue Chip-10 index reported a 17.9% increase over 30 days (see Figure 1 and Figure 2). The inflow of funds into blue chip NFTs highlights the ongoing "flight to safety" sentiment among NFT market participants.

2. Chromie Squiggle included in the blue chip index for the first time, Meebits returns to the Blue Chip 10 index

In the quarterly rebalancing of the Blue Chip-10 index, Chromie Squiggle (Art Blocks Curated NFT) was added to the Blue Chip-10 index for the first time, while Meebits returned to the Blue Chip-10 index. Chromie Squiggle and Meebits replaced NFT World and World of Women in the Blue Chip-10 index.

At the end of Q2, the estimated floor price of Meebits NFTs was around 4.5 ETH, with savvy Smart NFT buyers purchasing NFTs between June 19 and 25 (see Figure 3). Although there was a slight increase in Meebits transactions and unique buyers during this period, trading activity remained low compared to Q1 (see Figure 4).

NFT God Mode - Meebits Transactions

At the end of Q2 2022, the estimated floor price of Chromie Squiggle NFTs was around 8.5 ETH, with stable trading volume and significant buying activity from Smart NFT buyers (see Figure 5). On June 21, 50 Chromie Squiggle NFT transactions were processed, involving 41 unique buyers (see Figure 6).

Figure 5: NFT God Mode - Chromie Squiggle Transactions

Figure 6: NFT God Mode - Chromie Squiggle Transactions and Buyers

3. Generative art NFTs showed the best market growth in June

The performance of the Art-20 index (ETH) aligns with the phenomenon of Chromie Squiggle meeting the Blue Chip-10 index criteria. The Art-20 index (ETH) exhibited the largest recovery in June, with a 33.1% increase. At the end of Q2, generative art NFTs accounted for the majority of the art-related NFTs in this index (92% market cap, see Figure 7).

Figure 7: Art-20 Index(ETH) weighted by market cap

A notable Art NFT collection that continued to showcase performance in Q2 is Damien Hirst's The Currency. At the end of Q2, The Currency's trading price was 7.69 ETH. This collection began in 2016 from physical art, exploring the boundaries between art and currency. Market participants in The Currency acquired NFT artworks, choosing to hold either the tokenized (digital) form of the artwork or the physical artwork.

Figure 8: NFT God Mode - The Currency's Price and Volume

Market Interpretation

In the recent Q2 rebalancing, only 306 NFT projects met the liquidity requirements set for inclusion in the Nansen NFT index. This characteristic suggests that this upward trend may not be sustainable. The characteristics of the NFT-500 (ETH) index reflect the broader NFT market, where trading activities such as trading volume, transaction count, and user numbers remained low in June (see Figures 9a, b, and c). However, it is noteworthy that the analysis of monthly repeat buyers and first-time buyers of NFTs on ETH shows a strong recovery among repeat buyers in June, while first-time buyers remained relatively stable (see Figure 10). Recent Free Mint events may provide an explanation for the recovery among buyers. It is important to note that when someone connects their wallet for transactions, their wallet is at risk, especially in the case of unknown contracts. Therefore, checking contracts before minting is crucial. Some notable Free Mints that performed well in Q2 include GoblinTown and Moonrunners.

Figure 9a: Nansen NFT Monthly Trading Volume

Figure 9b: Nansen NFT Transaction Count

Figure 9c:NFT Monthly User Count Classification

Figure 10: Nansen NFT Trends: Repeat vs First-time NFT Buyers (Monthly)

Analysis of the updates to the NFT-500 (ETH) index composition indicates that the weight of social NFTs has increased by market cap (ETH). In contrast, the weight of gaming NFTs in the index has decreased (see Figure 11). When measuring the ratio of buyers to sellers' wallets for trading NFT collectibles within the NFT-500 (ETH) index, we observed a decline in this ratio at the end of May 2022, indicating a decrease in buyers and an increase in sellers. However, this ratio slightly rebounded in June and remained relatively stable (see Figure 12).

Figure 11: Nansen NFT-500 (ETH) Market Cap Classification

Figure 12: Nansen NFT-500 (ETH) Buyer to Seller Ratio

In Q1 2022, the daily volatility of the Nansen NFT-500 (ETH) was 2.4%. However, when we extend the analysis to Q2 data, this volatility increased (see Figure 13). Almost all NFT indices (Blue Chip-10, Social-100, Game-50, and Metaverse-20) showed increased volatility, consistent with the broader market, except for the Art-20 index, which exhibited lower volatility in art NFTs. The volatility across different NFT sectors still varies significantly, continuing the trend observed in Q1 2022. Additionally, based on insights from our previous quarterly reports, the metaverse NFT sector remains the most volatile.

Figure 13: Daily Volatility of Different NFT Sectors

Conclusion

Q2 2022 witnessed significant ups and downs in the crypto market, such as Celsius pausing withdrawals and announcing a debt restructuring plan, as well as the liquidation crisis of Three Arrows Capital. In the Ethereum (ETH) DeFi space, we are witnessing a dramatic deleveraging event, with considerable investors realizing historically significant losses. The Nansen NFT index (ETH) indicates that the trend reversal for NFTs began within the broader cryptocurrency market. The "flight to safety" sentiment in the NFT market remains very evident, and the limited liquidity in the NFT market suggests that this upward trend may not be sustainable. However, the analysis of monthly repeat users and first-time buyers of NFTs on the Ethereum mainnet shows a continuous growth of market participants in NFTs, highlighting the ongoing development of the NFT industry.