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Ethereum NFTs Plunge as ETH Price Soars

The recent surge in the price of Ethereum (ETH), the second-largest cryptocurrency by market capitalization, has had a negative impact on the non-fungible token (NFT) market. According to Blur, a platform for creating and trading NFTs, many popular Ethereum-based NFT collections have experienced significant drops in their ETH prices in the past week.

Blur reported that blue-chip NFTs such as Bored Ape Yacht Club (BAYC), Pudgy Penguins, Mutant Ape Yacht Club (MAYC) and Azuki have all fallen by more than 20% in ETH terms since February 22, 2024. BAYC, one of the most valuable NFT projects, saw its floor price (the lowest price at which an NFT is available for sale) drop from 58.93 ETH ($198,685) to 46.74 ETH ($157,512), a 20.7% decrease. Similarly, Pudgy Penguins, a collection of 8,888 pixelated penguins, saw its floor price fall from 18.47 ETH ($62,282) to 14.78 ETH ($49,795), a 19.9% decrease.

The decline in ETH prices of NFTs reflects the opportunity cost of holding NFTs instead of ETH, which has increased by more than 50% in the past month, reaching $3,800 on March 5, 2024. As ETH becomes more valuable, some NFT holders may be tempted to sell their NFTs for ETH, increasing the supply and lowering the demand of NFTs in the market. Additionally, some NFT buyers may be deterred by the high gas fees (the cost of executing transactions on the Ethereum network), which have also reached record levels in recent days.

The downward pressure on the NFT market has also resulted in some distressed sales and liquidations. Blur revealed that more than 70 BAYCs are in liquidation status at the Blend auction, a feature that allows NFT owners to sell their NFTs at a discount to the highest bidder. The liquidation status indicates that the NFT owners have failed to pay their debts or fees associated with their NFTs, and are forced to sell them at a lower price.

However, not all NFT projects are suffering from the ETH price rally. Some NFTs that are based on other blockchains, such as Bitcoin, Solana, or Klaytn, have seen their prices increase in their native tokens. For example, NodeMonkes, a collection of 10,000 monkey-themed NFTs on the Bitcoin network, saw its floor price rise from 0.55 BTC ($33,639) to 0.73 BTC ($44,722), a 32.7% increase.

The NFT market is still in its early stages, and is subject to high volatility and uncertainty. While the ETH price rally may pose a challenge for some Ethereum-based NFTs, it may also create opportunities for innovation and diversification in the NFT space. As more platforms, protocols, and projects emerge, the NFT market may become more resilient and adaptable to the changing crypto landscape.

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