The Hundred Billion Dollar Valuation Collapse: A Regrettable Turn for the Arrogant OpenSea?

In just two years, it went from being unknown to being valued at over $13 billion, and then in another two years, it was “cut off” by 90%, to the point where it was considered to be sold. This journey mirrors a tumultuous “roller coaster” ride of highs and lows.

This is the most authentic portrayal of OpenSea over the past four years. Just recently, OpenSea’s CEO and co-founder, Devin Finzer, revealed that OpenSea has received acquisition intentions and remains open to potential deals, without specifying when or by whom.

As a once “unicorn” level presence in the NFT trading market, how did OpenSea rise rapidly, and how did it fall behind in the competition within the NFT market? What potential disruptors and variables will the future NFT market landscape face?

OpenSea: Once a Unicorn Valued Over Ten Billion, Now Facing a Plummet

Similar to Uniswap and Dune, OpenSea is also a startup miracle in the Web3 space, rising rapidly from ground zero—especially in the two years starting from 2021, OpenSea’s valuation skyrocketed, climbing from relative obscurity to a staggering $13 billion, establishing itself as a dominant force in the entire NFT market.

Its journey began in January 2018 when OpenSea’s co-founders, Devin Finzer and Alex Atallah, created the platform for users to buy and sell NFTs.

However, due to the NFT market being relatively barren aside from the short-lived hype of Cryptokitties, the platform struggled with low NFT transaction users and volumes.

Until March 2020, OpenSea had only five employees, with monthly transaction volumes hovering around $1 million. Calculated with a 2.5% commission at that time, this translated to a monthly revenue of only $28,000. Fortunately, at the end of 2019, Animoca Brands invested $2.1 million, barely maintaining OpenSea’s financial balance.

OpenSea’s true takeoff began in 2020 when the co-founders aimed to double business volume by the end of the year. Unexpectedly, with the gradual recovery of the crypto market in the second half of 2020, OpenSea’s business volume surged rapidly, achieving the goal ahead of schedule in September 2020.

Starting from 2021, the NFT bull market kicked off, and OpenSea’s active user numbers and transaction volumes soared. In July 2021, the transaction volume reached an astounding $350 million, securing a $100 million investment led by a16z, resulting in a post-investment valuation of $1.5 billion.

A month later, in August 2021, OpenSea’s transaction volume skyrocketed tenfold to $3.4 billion, generating over $85 million in commission income.

From then until January 2022, OpenSea was almost unbeatable, with a monthly transaction volume of more than $3.5 billion, occupying 90% of the market share of the NFT industry, and a maximum valuation of more than $13.3 billion. Therefore, from a data perspective, OpenSea is unquestionably the unassailable giant in the entire NFT market, surpassing even Uniswap in market share and influence within the DEX sector by a considerable margin.

OpenSea Monthly USD Volume from 2022 to 2024

This has also become OpenSea’s swan song in dominating the NFT trading market. As the pioneer that first entered the NFT trading market and fully capitalized on the boom, OpenSea experienced a drastic drop in transaction volume in June 2022:

Plunging from nearly $2.6 billion in May to less than $700 million in June, OpenSea’s monthly transaction volume has now decreased to $120 million. This represents a staggering decline of over 95% from the peak in January 2022.

According to sources cited by Bloomberg, Tiger Global Management has marked down the value of its stake in OpenSea by 94%, and Coatue has also adjusted the value of its OpenSea holdings down by 90%, to $13 million, reflecting a substantial decrease.

Evolution of the NFT Landscape

Dealing the heaviest blow to OpenSea is the emerging dominator in the NFT trading market, Blur, which now commands over 70% of the market share. Blur, a newcomer in the NFT space launched at the end of 2022, swiftly surpassed OpenSea’s position through token airdrops in less than a year, becoming the largest NFT marketplace.

According to Dune data, as of the past week, Blur holds an impressive market share of 73.7% in the NFT market, claiming the top spot. OpenSea, on the other hand, has a market share of 21.7%, settling for the second position.

Market Share Overview of NFT Trading Platforms

If we review the evolution of the NFT landscape and the formidable disruptive capabilities of Blur, all the changes do not come as a surprise.

• “Vampire Attack” by LooksRare and x2y2

Firstly, the miraculous rise of OpenSea is to some extent attributed to its early-mover advantage, enduring through the lows and emerging as a pioneer. However, following the explosion of the NFT bull market, the competition and “vampire” attacks between products in the NFT trading market have been relentless, given OpenSea’s dominant position.

As we know, there is a clear trend in the Web3 and crypto world, with an increasing number of projects in DeFi, NFTs, blockchain gaming, and infrastructure. However, the homogeneity in competition is severe, with distinctions limited to factors such as name, user experience, token incentives, and transaction fees.

“In market competition, who copies who is not important; what matters is who is the first.” This holds particularly true for Web3, evident since the Sushi vampire attack on Uniswap.

Therefore, starting from 2022, entities like LooksRare and x2y2, known as “OpenSea killers,” capitalized on the delay in OpenSea issuing tokens. Leveraging token distribution incentives, they gained relative advantages but failed to truly shake OpenSea’s dominance once the Airdrop frenzy subsided.

Most of the trading reward mechanisms led to a surge in fake transactions, and after a brief prosperity, they quickly returned to silence, lacking strong competitors to truly share the NFT market share.

• Blur: The True “Trailblazer” in the NFT Arena

At the end of 2022, Blur emerged and introduced a more advanced mechanism called Bid Airdrop, surpassing traditional transaction reward systems. Bid Airdrop is a marketing strategy in the crypto asset space designed to distribute tokens to participants through auction or bidding participation. This innovation effectively addressed the challenge of insufficient liquidity in the NFT market:

Encouraging participants to make offers. The closer the bid to the floor price, the greater the reward. Essentially, it can be seen as the “bagholders” of secondary market platform tokens subsidizing those making bids. This trajectory bears similarities to the rise of Aave – a protocol facilitating large holders in unloading assets. In essence, it is a protocol that works favorably for significant transactions.

Looking at the past year’s development trajectory, Blur and its founder Tieshun can be considered the top “trailblazers” in various “mature arenas”:

NFT Trading arena: Blur disrupted the once-dominant OpenSea, reducing its valuation from $13.3 billion to $1.4 billion.

NFT Lending arena: Blend’s loan transaction volume exceeded $4.6 billion, becoming the leader.

L2 arena: Blast’s TVL surpassed $1.78 billion, according to L2Beat statistics, ranking just below Arbitrum ($12.34 billion) and Optimism ($6.6 billion), surpassing Base, zkSync, and other L2 solutions, securing a spot in the top three L2 solutions.

New Trends in the NFT Market

Since 2023, apart from Blur replacing OpenSea, several potential variables have emerged.

Primarily, the rise of pan-Bitcoin NFTs, represented by Ordinals, has sparked a new wave of “BitcoinFi,” reaching new peaks in activity within the Bitcoin ecosystem.

According to Cryptoslam data in the past 30 days, Bitcoin’s on-chain NFT sales amounted to $238 million, making it the second-largest blockchain in NFT sales, only behind Ethereum ($456 million) and surpassing Solana ($232 million) and Polygon ($50.03 million).

Latest data from Dune as of February 16 shows that Ordinals has minted over 6,150 BTC, exceeding $320 million.

This trend has given rise to NFT trading markets within the Bitcoin ecosystem, such as the OKX Web3 wallet Ordinals market and the UniSat NFT trading market. As of last week, the total trading volume on the OKX Web3 wallet Ordinals market has surpassed $1.3 billion.

Moreover, in the second half of 2023, the NFT market seems to be gradually stabilizing, with the floor prices of many blue-chip NFTs rebounding or experiencing significant increases. The Solana ecosystem’s NFT track has also entered a new speculative cycle.

Simultaneously, pan-NFTs like ERC404, similar to Ordinals, have re-emerged. As “new assets” with duality, these pan-NFTs can be traded on both OpenSea and Uniswap, potentially bringing significant disruption to the NFT market landscape in the future.

Especially noteworthy is Uniswap’s previous acquisition of the NFT trading market Genie, signaling its clear entry into the NFT trading market. Genie aggregates transactions from other NFT markets, while Uniswap provides transaction depth.

Overall, competition in the NFT market revolves around both product and asset dimensions:

In the first half of 2023, Blur’s product dimension innovation, with its liquidity reward mechanism, dealt a blow to older NFT platforms like OpenSea and x2y2.

In the second half of 2023, newcomers like OKX and UniSat rapidly rose by introducing a new asset category represented by Ordinals.

As we enter 2024, the increasing popularity of ERC404 as a new asset type raises questions about whether it will provide traditional token trading protocols like Uniswap with a new entry ticket into the NFT market, potentially reshaping the NFT market landscape in 2024. This is a trend worth keeping an eye on.

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