From GameStop to Coinbase, crypto rout sours NFT bets

A visitor walks past artwork displayed at an NFT-themed coffee shop in Beijing.

By Hannah Miller

Bloomberg

Dec. 28, 2022 1:35 PM PT

Sales of nonfungible tokens soared to a record high in January, as the assets gained popularity among crypto investors, mainstream consumers and even celebrities. But as 2022 comes to a close, it’s a completely different story.

Global monthly NFT sales plunged 89% in November compared to their all-time high of more than $4.9 billion in January, according to blockchain data tracker CryptoSlam. The decline threatens marketplaces, including those launched by GameStop and Coinbase Global, that peddle the once white-hot digital assets. It also mirrors a broader crypto rout sharpened by the implosion of hedge fund Three Arrows Capital, the bankruptcy of crypto lender Celsius and the spectacular downfall of digital asset exchange FTX.

“Confidence has been shaken dramatically,” said Ian McMilan, chief growth officer of Mojito, a software startup that helps mainstream brands build NFT platforms.

While GameStop’s NFT marketplace posted a record of more than $2.1 million in daily volume on July 12, sales have been rocky since the video-game retailer launched the platform five months ago, according to data provided by DappRadar. The blockchain analytics firm, which tracked GameStop NFT’s blockchain transactions on the Loopring protocol, reported a little over $4,820 worth of transactions on Oct. 30, the day before GameStop began selling NFTs based on the ImmutableX protocol.

It’s unclear how the platform is currently doing since DappRadar stopped reporting GameStop NFT sales on Nov. 9. A DappRadar spokesperson said the company and GameStop decided to disable tracking because without the ImmutableX volume, the data would be misleading, but the company hopes to resume tracking “in the foreseeable future.”

Meanwhile, GameStop ended its two-month pilot partnership with FTX US selling the crypto exchange’s gift cards on Nov. 11, the same day FTX filed for bankruptcy, according to a tweet, which said it “will be providing full refunds to impacted customers.” GameStop did not respond to a request for further comment.

The NFT marketplace for FTX US, the American affiliate of FTX, is directing visitors to the crypto exchange’s bankruptcy proceedings. NFTs created or “minted” using the platform also link to the same bankruptcy web page or show an error message when viewed on other NFT marketplaces such as Magic Eden.

Declining interest in NFTs is also hitting Coinbase’s platform, which had a slow start when it launched in May. Trading volume has declined significantly since the marketplace’s all-time best day of sales in September, according to blockchain tracker Dune Analytics. While Coinbase NFT posted more than $533,500 in sales on Sept. 9, it recorded just over $5,000 worth of volume on Dec. 26, a 99% drop.

The platform has posted $7.2 million in all-time sales volume since its start, according to Dune Analytics. That’s less than the $8.2 million OpenSea — the No. 1 NFT marketplace based on trading volume — recorded in just the last 24 hours, according to DappRadar. But even OpenSea has seen sales remain flat at $186 million over the last 30 days.

When asked about what Coinbase NFT was doing to boost sales, Max Branzburg, consumer product group lead at Coinbase, said in a statement that the company had redesigned its Drops program for NFT launches and added a way for NFT collectors to avoid paying high fees stemming from blockchain network congestion.

“In Q3 of this year, over 92% of our Drops on Coinbase NFT sold out in less than 24 hours,” he said.

But with new scandals besieging the industry, a NFT recovery could be harder to come by, according to Catherine Flick, a reader at De Montfort University in Britain who studies the ethical implications of NFTs.

“Now that we’ve seen multiple crypto crashes, the pure monetary value of the NFT is no longer a selling point — most people have lost money on them,” she said in an email to Bloomberg.

Mojito, which has worked with brands such as Sotheby’s and the Milwaukee Bucks professional basketball team to develop NFT offerings, has seen some of its clients pull back from the assets during the market slowdown, especially if they’re being used for novelty marketing campaigns, according to McMilan. He said other companies are still interested in using NFTs in the long-term though, especially if they’re paired with more traditional products like physical merchandise.

“People are just wanting to sit and wait a bit and let the storm pass,” he said.