Three cases of bank collapse have recently occurred and impacted the NFT market. These banks include Signature Bank, Silvergate, and Silicon Valley Bank. This event resulted from strict regulations, an economic downtrend, a liquidity crunch, and failure to meet customers’ withdrawal requests.
Following the recent collapse of the digital bank Silicon Valley Bank (SVB), DappRadar reported a significant drop in trading volumes for non-fungible tokens (NFTs).
SVB Collapse Impact On NFT Trading Volumes
According to the data aggregation platform, DappRadar, the SVB collapse has sent shock waves throughout the cryptocurrency industry as investors begin to reassess their risk exposure to various digital assets. The incident brought the total number of non-fungible tokens traders to its lowest value since November 2021, dropping to around 11,440.
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The report from DappRadar stated that the trading volumes of NFT were fluctuating between $68 million and $74 million before the fallout of Silicon Valley Bank on March 10. As of March 12, the figure declined to $36 million. The decline in trading volumes was a 27.9% dip in the daily sales of non-fungible tokens, recorded between March 9 and 11, 2023.
Before now, Silicon Valley Bank was seen as a key player in the non-fungible tokens market, providing critical financial infrastructure and investment capital for various projects. With its sudden collapse, many NFT projects now struggle to secure funding and liquidity, which is the main reason behind the drop in trading volumes.
The report also highlighted the impact of the broader cryptocurrency market downturn, which has seen major assets like Bitcoin and Ethereum lose significant value in recent weeks.
This occurrence may have prompted many investors to shift their focus away from riskier assets like NFTs to more stable assets like gold and government-backed currencies.
The report added that in response to the de-pegging of the USD Coin token, trader attention had moved away from the nonfungible token market, as it fell to $0.88.
Blue Chip Market Value Remains Intact
The decline in NFT trading volumes did not affect the value of blue-chip nonfungible tokens. Despite the recent decline in NFT trading volumes, the value of blue-chip NFTs remains unaffected, based on market watch.
Blue-chip NFTs are high-end digital assets that have retained their value even as the overall NFT market experienced a downturn. While the total NFT trading volumes are down to $36 million, blue chips including CryptoPunks and Bored Apes Yacht Club (BAYC), have maintained their value, even though there was a slight decline in their prices.
According to Greg Solano, co-founder of Yuga Labs, the company’s financial status is not overly exposed to Silicon Valley Bank. This could be the reason for the immunity of these blue chip nonfungible tokens to the declining trading volumes of the broader non-fungible tokens market.
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Aside from this, blue-chip non-fungible tokens provide a unique opportunity for creators and artists to monetize their work in the digital age, creating a new revenue stream in an era where technological advancements have disrupted traditional revenue streams.
Based on DappRadar’s report, the fallout of Silicon Valley Bank and Signature Bank has dramatically impacted the crypto industry, especially the decentralized application ecosystem. These events have raised the need for the digital currency space to rely less on the regular banking infrastructure and become more self-sufficient.
Featured image from Pixabay and chart from Tradingview.com