Last week, the NFT market experienced a general decline, with blue-chip NFTs such as BAYC, Azuki, and DeGods all falling by more than 10% for the week. To the surprise of the community, the source of this general decline is likely to be a mechanism update of the NFT fragmentation protocol Flooring Protocol half a year after its establishment.
FLC wants to be the ultimate index in the NFT world!
On December 31, 2023, the NFT fragmentation protocol Flooring ProtocolMedium channelSent the first articlearticle, titled Innovating NFT Trading: Introducing the µToken/FLC Trading Pair in the Floor Liquidity Pool. The article writes that Flooring Protocol will be relaunched in January 2024 and launch a groundbreaking new model that will link the price of the governance token FLC to the valuation of mainstream NFT collections through µToken.
µToken is a token that represents the fragmented value of NFT. Users deposit NFT into Flooring Protocol and obtain the µToken represented by the corresponding NFT. Before the mechanism update, users could only trade between Uniswaps ETH and μToken trading pairs through Flooring Protocol. After the introduction of the µToken/FLC trading pair, users trading operations on FLC will directly affect the price of µToken. When trading on Flooring Protocol, the best exchange route on Uniswap will be ETH -> FLC -> µBAYC.
This seems to be a product that fits the market needs well. In the NFT market, NFT series that already have relatively certain values often have high investment thresholds, and for those newly emerging NFTs, their future value-added space cannot be determined. And if FLC is included in the investment portfolio strategy, choosing FLC = optimistic about blue-chip NFT, this is undoubtedly attractive to users who are interested in investing in the NFT market.
FLC became the trigger for the NFT market collapse
Empowering FLC is a sure piece of good news for traders. Since January 2, buying in FLC has surged. On January 3 alone, the number of buy orders worth more than $10,000 in a single transaction surged from 7 on January 2 to 50. Previously, FLC had very few large-value buy orders, and the total number of buy orders worth more than $10,000 in the week before the mechanism was updated was only about 10.
During December 2023, the price of FLC ranged between $0.0075 and $0.012, and in two days from January 2 to January 4, the price of FLC surged from $0.012 to $0.035.
After the FLC price fluctuated significantly, Flooring Protocol began to add trading pools for FLC and various µTokens while ignoring market price fluctuations, which also led to a rapid increase in FLC circulation. By January 4, the new buying orders of FLC were no longer enough to push up the price of FLC. The price of FLC began to trade sideways and slowly fell from January 4 to 7.
After the price surged, investors and users who originally held FLC and bought it in advance with the help of the news gradually began to sell their FLC, or exchange it for µToken, withdraw blue-chip NFT from Flooring Protocol using µToken, and sell it on Blur.
For example, takeAddress starting with 0x E 6After buying FLC in large quantities six times on January 3, he sold FLC again on the same day after the price skyrocketed. In one of his trading operations to sell FLC, he sold over $110,000 worth of FLC in one transaction. FLC. The next day, this address continued to buy and sell FLC.
Some liquidity providers, such as addresses starting with 0x 27 and 0x F 6, will use their FLC holdings to exchange for blue-chip NFTs such as BAYC, Azuki, and DeGods starting from January 5, and sell them on platforms such as Blur and Opensea .
The impact of transactions that occurred on Flooring Protocol was quickly transmitted to the entire NFT market. BAYCs floor price has been declining for a week since January 6. As of January 13, its floor price has dropped 15% from its highest point. Except for BAYC, the floor price of other blue-chip NFTs generally shows a downward trend.
It took half a month for DeGods, whose floor price climbed from 2.60 ETH to 3.63 ETH, to start a cliff-like decline after the 7th. The floor price fell by 27% in less than a week.
After both the FLC and NFT markets collapsed, the founder of Flooring Protocol posted two tweets on January 11 in response to the fluctuations in NFT and FLC. I am not short NFT. The founder of Flooring Protocol said that the decline of NFT has nothing to do with him, and once again introduced the cooperation with the NFT options protocol Wasabi Protocol, but I am providing µToken for Wasabi Protocol, and others will use it to short . Regarding FLCs sharp rise and fall, the founder of Flooring Protocol showed a slightly self-deprecating attitude, This is just a correction.
The NFT series supported by good news cannot escape the impact. Azukis official Twitter account retweeted a tweet from Weeb 3 Foundation on January 5, leading the community to speculate that it might issue a token called ANIME. This caused Azukis floor price to rise by more than 30% in two days. It once soared to around 8 ETH. However, Azuki failed to withstand the impact of the sell-off. Since January 7, Azukis floor price began to decline, and fell back to 6 ETH on January 13.
The price fluctuations of blue-chip NFTs have driven the entire NFT market. According to Blur data, as of January 12, many NFT series have fallen between 10% and 25% within 7 days, and the NFT market seems to be experiencing a general decline.
Is NFTFi “playing with fire”?
In the crypto world that pursues profit, one thing that is often criticized in the NFT market is that NFT assets focus more on social attributes and the asset appreciation path is unclear. In the development of the NFT market, this is not the first time a crisis event like the one triggered by Flooring Protocol has occurred.
On the one hand, it is often difficult to provide liquidity solutions for the NFT market to protect itself. When the NFT market cooled down in 2022, the fall in BAYC’s floor price triggered the liquidation auction mechanism of the NFT lending platform BendDAO, resulting in a large amount of liquid funds on the platform. Quickly evacuated, more than 16,000 coins in the loan pool fell to the lowest in four days, with only 0.58 coins left. On the other hand, while attaching the value of NFT to FT tokens and introducing DeFi mechanisms to bring liquidity to the market, the cultural significance, brand value and community loyalty carried by the NFT itself also make way for liquidity And be downplayed.
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《BendDAO is insolvent, will NFT finally face a subprime mortgage crisis?》
Back to Flooring Protocol, the fragmented trading model of NFT has its obvious advantages, which can lower the threshold for investors to purchase NFT and make it easier for NFT assets to flow in the market. However, the value of NFT, which originally relied on community culture, has left its artistic carrier and relied on the operation of the DeFi mechanism to find value-added space in the transaction flow of various tokens. This process will undoubtedly blur the consensus roots of NFT.
The crash came to an end on January 13, when the price of FLC bottomed out and returned to $0.012 before the sharp rise. After that, the price of FLC and the floor prices of blue-chip NFTs such as BAYC and Azuki began to recover. Will a similar plot happen again?
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