OpenSea, the world's largest non-fungible token (NFT) market saw a significant drop in daily volume due to many individuals' concerns over the market's potential to grow.
For context, the market processed $5 million worth of NFT transactions on August 28th, which is 99% lower than its record high of $405.75 million on May 1st.
This was triggered when the large drop in daily volume as well as the drastic drop in OpenSea users and transactions was due to the fact that most individuals began to lack interest in blockchain-based collections over the past few months.
For example, the Bored Ape Yacht Club (BAYC) floor price fell by 53% to 72.5 Ether (ETH) on August 28 compared to 153.7 ETH on May 1, while the CryptoPunks floor price fell 20% from its July high of 83.72ETH.
Strictly speaking, NFT prices are quoted in the native currency of the blockchain, therefore digital collections created on Ethereum will be purchased using Ether which also means NFT prices fall if the ETH market valuation plummets.
Last week, BendDAO, a decentralized autonomous organization that allows NFT owners to pledge their digital collections by taking loans in ETH worth 30% to 40% of the NFT floor price voted to change the protocol code to make NFT pledging easier.
Therefore, the vote took place after the rise in the price of Ether increased the value of ETH-denominated loans in terms of dollars, subsequently the price of NFT plummeted including reducing the value of the collateral held by BendDAO.
As a result, BendDAO faced a debt crisis that made borrowers unable to pay their dollar-denominated loans due to the drop in the price of ETH.
In fact, lenders find it difficult to recover their loan amount due to the fall in collateral valuation.
The justification is that the floor price of NFT including BAYC will plunge further if market liquidity continues to be 'dry'.
