Bitcoin, ethereum and cryptocurrency prices are struggling after a terrible start to 2022 (even as the non-fungible token (NFT) craze rolls on).
The bitcoin price has lost 40% from its value since its November peak while ethereum and its biggest rivals solana and cardano have better held onto earlier gains, driving down bitcoin’s dominance of the combined crypto market. Today, bitcoin makes up just 40% of the $2 trillion crypto market, down from over 60% 12 months ago.
Now, Wall Street giant JPMorgan
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“It looks like, similar to DeFi [decentralized finance] apps, congestion and high gas fees has been inducing NFT applications to use other blockchains,” JPMorgan’s analysts, led by Nikolaos Panigirtzoglou, wrote in a note to clients last week, it was first reported by Business Insider. Ethereum transaction fees have sky-rocketed in recent months, with the network buckling due to the volume of users.
Ethereum’s NFT market share has fallen from around 80% from about 95% at the beginning of last year, JPMorgan’s team wrote in the note published last week. “If the loss of its NFT share starts looking more sustained in 2022, that would become a bigger problem for ethereum’s valuation,” they said, adding NFTs are currently the “fastest-growing universe in the crypto ecosystem.”
JPMorgan’s analysts found that since August, ethereum rival solana—the price of which is up a mind-numbing 3,600% over the last 12 months—has been winning NFT market share from ethereum. Solana is touted as a faster and cheaper alternative to ethereum but critics have said its network is overly centralized and it has suffered from a number of outages in recent months.
The ethereum price is meanwhile up an eye-popping 2,000% over the last two years, compared to bitcoin’s 400% increase over the same period. Investors have piled into ethereum over the last two years as interest in ethereum-based DeFi—using crypto technology to recreate traditional financial services—and digital media NFTs has exploded.
Earlier in the month, JPMorgan also warned ethereum is at risk of losing its DeFi dominance due to its failure to upgrade and scale its network as quickly as rivals such as solana and cardano. Ethereum has recently begun a long-awaited upgrade that’s expected to be completed this year but it’s feared it may not come soon enough to keep ethereum competitive.
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The NFT market has ballooned to around $12 billion over the last year, with the craze sent into the stratosphere by the sale of one NFT, a collection by the digital artist Beeple, for $69 million in March 2021.
NFT marketplace OpenSea has generated around $2.7 billion in volume so far this year, mostly fueled by a price surge in the wildly popular Bored Ape Yacht Club NFT collection, and is on track to surpass the $3.4 billion high it reached in August, according to data from Dune Analytics.
Over the last week, the price of bitcoin and ethereum have continued their downward trend, with their declines hitting the likes of solana and cardano.
“The market has remained largely range-bound throughout the past week as bitcoin and ethereum continue to trade around September 2021 lows of $40,000 and $3,000 respectively,” Will Hamilton, head of trading and research at Trovio Capital Management, said via email.
“Investors and traders appear to be digesting the macro possibilities within this new inflationary regime markets have entered, alongside an increasingly hawkish Federal Reserve.”