{"id":1235,"date":"2022-11-12T20:17:18","date_gmt":"2022-11-12T20:17:18","guid":{"rendered":"https:\/\/solanacrypto.news\/2022\/11\/12\/ftxs-implosion-is-crushing-the-solana-nft-ecosystem\/"},"modified":"2022-11-12T20:17:18","modified_gmt":"2022-11-12T20:17:18","slug":"ftxs-implosion-is-crushing-the-solana-nft-ecosystem","status":"publish","type":"post","link":"https:\/\/solanacrypto.news\/2022\/11\/12\/ftxs-implosion-is-crushing-the-solana-nft-ecosystem\/","title":{"rendered":"FTX\u2019s Implosion Is Crushing The Solana NFT Ecosystem"},"content":{"rendered":"
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FTX’s collapse is crushing the NFT ecosystem<\/p>\n

getty<\/small><\/figcaption><\/figure>\n

What Happened<\/strong><\/h2>\n

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In response to the FTX insolvency, the crypto markets have been in a risk-off mood, with asset prices falling precipitously for all crypto tokens, fungible and nonfungible.<\/p>\n

The aggregate market cap of all crypto currencies fell 23% to $786 billion from $1.02 trillion within four days. Nansen\u2019s NFT-500 index indicates prices of nonfungible tokens (NFTs) on the popular Ethereum prices blockchain fell 14% over the same period. Solana NFTs were hit even harder, with SolanaFloor indicating their aggregate floor value dropped 68% from $424 million to $135 million over the last few days. <\/p>\n

Among some of the top Ethereum blue-chip collections, the Bored Ape Yacht Club floor price fell 43% to $60,000, CryptoPunks was off 37% to $69,000 and MoonBirds dropped 51% to $6,800. On Solana, the DeGods floor price fell 66% to $2,700, Solana Monkey Business 68% to $2,000 and y00ts 70% to $840. <\/p>\n

Part of the underperformance of Solana NFT collections is due to FTX\u2019s advocacy of the Solana layer-one blockchain. As the exchange\u2019s implosion was taking place, the price of the solana token tanked 68% to $12. Along with the slide in nonfungible tokens, which represent collections of things like artworks that can differ from one another, FTX\u2019s fungible exchange token known as FTT and FTX\u2019s Solana-based decentralized exchange (DEX) Serum are down 89% and 53%, respectively, in recent days. <\/p>\n

The saga of FTX\u2019s insolvency is unfolding, but the picture is starting to become clearer. It appears the exchange lent out customer deposits to its sister company Alameda Research, which was a hedge fund that made poor discretionary bets with the assets. Alameda\u2019s collapse triggered FTX\u2019s insolvency, creating a balance sheet hole to the tune of $10 billion and leading FTX to file for bankruptcy-court protection on Friday, Nov. 11. <\/p>\n

Broader Context<\/strong><\/h2>\n

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FTX emerged as a major NFT player. The exchange made strategic investments in leading NFT projects, partnered to support new issuances, and launched its own marketplace. <\/p>\n

FTX\u2019s $2 billion venture capital arm, FTX Ventures, invested in notable NFT projects including Yuga Labs, the creator of the Bored Ape Yacht Club. FTX Ventures also participated in Doodles\u2019 recent series A fundraising round in which the maker of pastel profile picture avatars raised $54 million <\/a>at a $704 million valuation. <\/p>\n

Additionally, FTX has been active with primary issuances of new NFT collections. FTX partnered with music festivals Coachella and Tomorrowland to issue NFTs offering unique benefits and experiences for concert-goers. It also allied with notable brands and franchises including the Golden State Warriors, the Washington Wizards and Capitals, Dolphin Entertainment and Mercedes F1to support their collections. <\/p>\n

Despite these high-profile partnerships, FTX\u2019s NFT platform was never able to gain traction. Interestingly, since FTX\u2019s solvency came into question in recent days, NFT volume spiked to $13 million. It is possible that this increase was caused by users bypassing FTX\u2019s suspension of fungible token withdrawals by purchasing NFTs and then withdrawing those assets as a way to recapture value from the exchange. <\/p>\n

Key Players<\/strong><\/h2>\n

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FTX – International off-shore crypto exchange with its U.S. arm, FTX.US. FTX is one of the largest global exchanges by trading volume, serving institutional and retail clients<\/p>\n

Alameda Research – Hedge fund that conducted trading and market making activity on the FTX exchange<\/p>\n

Sam Bankman-Fried (SBF) – Founder and former CEO of FTX and Alameda Research<\/p>\n

Key Quote<\/strong><\/h2>\n

\u201cAs an industry leader, FTX\u2019s reputation holds significant weight in the perception of cryptocurrency among retail users and investors. The FTX collapse has impacted the average consumer who is less embedded in the crypto industry more than any other collapse, since FTX was globally renowned and trusted. The NFT industry will see an increase in intimidation and skepticism among mainstream users in the short term.<\/p>\n

The NFT and crypto industry must regain the trust of the world again, which while challenging, will be done through the continued development of NFTs with real-world utility that can solve problems. Given the growing fear of the perceived financial risk of entering the cryptocurrency and NFT space, solutions that provide streams of revenue for creators and companies will be particularly beneficial for moving the industry forward from this crisis.\u201d<\/p>\n

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