The day-trading army is all over the NFTs | Economy
Bankrupt car rental companies and Bitcoin-to-the-moon betting are falling out of fashion, as the retail army dives into the world of digital art like never before.
Thanks to collectibles like Pudgy Penguins and the Bored Ape Yacht Club going viral on social media, sales of non-fungible tokens in the largest market, OpenSea, jumped to $ 3 billion in August. That’s more than 10 times the count from the previous month, and the exchange is now regularly the # 1 user of computing power on the Ethereum network.
Day traders bet on computer-generated avatars, leaving rival speculative trades like traditional cryptocurrencies and stocks even in the dust. Even as Bitcoin bounces back to $ 50,000, telltale signs of collateral leverage euphoria are well below the May peak. Meanwhile, Wall Street data suggests zeal among the Robinhood crowd for trading US stocks and options is waning.
“Some of the retail business has migrated to NFTs,” said Martha Reyes, head of research at Bequant, a crypto brokerage firm. “Let’s face it, it’s just more fun collecting primate and penguin jpegs.”
NFTs are the latest explosion of speculative trading this year, supercharged – depending on who you ask – by stimulus checks, monetary easing, social media, or the sheer boredom of pandemic life. The average price of the Bored Ape Yacht Club NFT – yes, literally a monkey-themed avatar symbol – rose from 8.78 ETH on July 31 to 41.4 ETH, or around $ 156,368, while Pudgy Penguins climbed over 100 times to 2.6 ETH.
This drives up transaction costs on the Ethereum network that powers NFT business, with the average gas tax now at its highest since late May. Along the way, digital token transactions are becoming more and more expensive on the blockchain that gave birth to decentralized finance.
“As NFT activity attracts the attention of the ecosystem, gas prices have risen to daily levels that exceed many retail traders,” wrote Luke Posey, researcher at analytics firm Glassnode, in a note Wednesday.
As the NFT community enjoys its moment in the sun, the Reddit-fueled exchanges that defined the meme market mania earlier this year seem positively picturesque.
In the U.S. stock market, small options trades typically favored by Robinhood types recently fell to just 18% of total volumes, the lowest since April 2020, according to data from UBS Group AG. Retail cash stock purchases also fell to a three-month low in August, according to Vanda Research, which tracks those flows.
Of course, even though their overall buying has slowed down, that doesn’t mean day traders have lost their grip. A new stock list of memes such as Skillz and Vinco Ventures rallied on the back of social media this week, while analysts at Vanda also believe retail buying could pick up in the final months of 2021.
Still, look at Bitcoin, once considered a marginal asset. Its rally from the low in June fails to excite traders in the same way as the boom at the start of the year.
On the Binance exchange, funding rates, or the cost of positioning on bullish futures, rose only modestly to less than 4%, after falling 39% in April, according to Bybt data. The number of active addresses, an indication of transactions on the blockchain, is still 29% below its peak, according to Glassnode.
In addition, only 54% of Bitcoin futures contracts in circulation are now guaranteed by Bitcoin itself as collateral, up from 70% at most. With more and more traders using stablecoins linked to fiat currencies, this is the latest sign that the speculative community is showing more restraint with the original cryptocurrency even as the NFT craze grows. rage.
“Open interest has increased but is also well below its peak, as is the funding rate, which suggests a lack of foam,” Reyes said at Bequant, referring to trading Bitcoin.