The race of crypto exchanges to create NFT marketplaces

Market Insights Jun 25, 2021

NFTs tend to revolutionise many industries in the years to come. Indeed, this digital asset technology, although existing for several years now, has seen its popularity explode recently and projects have been multiplying in the past few months.

The main characteristic of NFTs is to be able to authenticate an object (a card, a video clip, an image, etc.), whether physical or digital, through the use of blockchain and smart contracts. Unlike fungible cryptocurrencies, such as Bitcoin or Ethereum, these tokens then become digital objects with characteristics unique to themselves. Being unique, we can then attribute to these objects a rarity, a value and therefore a price that can sometimes reach several million dollars. The most expensive NFT for now is the digital collage by Beeple sold at Christie’s at $69.3m (11 March 2021).

The major benefits of NFTs are security and traceability of ownership, fractionning copyrights and flexibility, as detailed in our previous memo The NFT Revolution.

The potential applications of this technology are wide. Today we see NFTs making a place for themselves in many markets, such as art, sports, video games, collectibles, collectible cards, etc.

NFTs represent a significant opportunity in the digital asset market today, and crypto exchanges are trying to capitalise on this trend. Some players such as Opensea, Rarible and Nifty Gateway are exclusively focused on the NFT segment while other crypto trading platforms have recently shown an interest in this sector. Some of them have even already launched their NFT platform, following the hype in this nascent segment:

  • The US platform Gemini acquired Nifty Gateway, one of the main global NFT's platform. This acquisition was made in early 2019, which proves that the company founded by the Winklevoss brothers arrived early in the market and could benefit from a first mover advantage in this promising segment.
  • Binance, the world's leading cryptocurrency exchange has announced its plans to launch an NFT market in June 2021. Binance promised "minimal fees, great liquidity, and high value collectibles." Changpeng Zhao (CZ), CEO of Binance, said: “Binance serves millions of users around the world, and many of them will now be able to access the burgeoning NFT space.” The new marketplace will operate primarily on the Binance Smart Chain (BSC) and Ethereum (ETH). Considering the leadership of Binance in the crypto market, we believe that it is well positioned to become a leader in the NFT segment.
  • Wazirx, India's largest exchange (which is owned by Binance) announced the launch of an NFT marketplace for local creators.
  • Korbit, one of the leading crypto exchanges in South Korea, is starting the first NFT marketplace in the country, according to an announcement made by the company.
  • FTX, the famous crypto derivative exchange, is the last to set up a dedicated NFT marketplace. A number of NFTs are already listed on the marketplace such as “SBF Lunch,” which is an NFT that can be redeemed for an in-person lunch or a 30-minute Zoom call with FTX CEO Sam Bankman-Fried auctioned at $110,000 earlier this month. Other non-fungible tokens are available in the Marketplace, including FTX-branded caps, hoodies, t-shirts and socks. A number of third parties are also listed.                                                                                                                    

We can expect fierce competition between NFT marketplaces led by crypto exchanges in the coming months.

At Trakx, we offer the Top 10 NFT index, an instrument that replicates the performance of the 10 largest NFT protocols by market capitalisation with a cap at 15% to enhance diversification. Trakx index rebalances every month, making sure investors don’t miss out on the latest trends.

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Gary Rebibo

CMO @Trakx