NFT token trading skyrocketed to more than $6 billion during 2022 yet it fell below $430 million in present times which signals the beginning of a blockchain sector collapse.
People throughout the world fixated solely on NFT tokens for a brief time since everyone desired exclusive tokens to expedite their wealth accumulation and these tokens held monetary value. Many worldwide companies joined forces with main investors to support this sector by contributing funds that included luxury brands Gucci together with Vuitton and countless renowned celebrities including Snoop Dogg and Paris Hilton and Logan Paul and Eminem and more.
OpenSea started its path toward decline after it lost control over market volatility as the leading marketplace for non-fungible token sales. This led the platform toward an existence-threatening downfall. How did this happen?
Follow the trend
Devin Finzer joined forces with Alex Atallah in 2017 to establish a revolutionary internet infrastructure which permitted users to provide their Wi-Fi connectivity to strangers for digital payment. Y Combinator fully embraced this seemingly outrageous concept in 2018 after its acceptance by the company which launched successful tech firms such as Airbnb.
At the same time NFTs or non-fungible tokens emerged on the market as these digital assets function like single-piece original artwork belonging to a solitary owner. Digital currencies lacking central authority control became a platform for publishing weird video and image content consisting of flying cats with humanlike monkeys.
Finzer and Atallah identified growing consumer interest in NFTs so after finishing their incubation stage they chose to launch OpenSea NFT as a marketplace that collects shares of every token transaction. The founders made the decision to totally discard the initiative despite receiving validation from people who originally supported and believed in their concept and success potential. Finzer announced their company secured $2 million in funding from Founders Fund along with Peter Thiel as well as other major investors which improved their confidence in themselves and the project.
Moment of rush towards success
During their initial operations the store failed to become profitable as its basic actions processed no more than a thousand daily transactions yet its user count remained low which led them to start the business with under ten employees.
The platform experienced a significant transformation in 2021 when Mike Winkelmann sold his "NFT" token for $69 million causing a more than 3fold increase in platform transaction value. This massive success attracted investors who invested their money to join this thriving market so the company received $23 million at a $120 million valuation triggering its genuine expansion.
The company achieved significant growth in profits during the third quarter of 2021 when they increased from $9 million at the start of the year to $186 million and before the end of the year they secured $100 million through their heightened valuation which rose to $1.5 billion. The vast profit boost marked the beginning of new challenges for the organization.
A flood of problems
Opening in 2023 marked the start of issues when Nate Chastain – product division leader at the startup – disclosed confidential data and engaged in token trading by showcasing tokens from him and his associates on the homepage for higher returns.
Both of these incidents led to damaging consequences for Open Sea since the company fired its employee who received 3 years of prison time for dropping the site online and letting numerous worthless or fraudulent symbols enter the platform.
According to employee reports to The Verge the addition of numerous technology professionals from companies like Amazon and Google and Meta failed to satisfy the workforce even though these employees were ideal for management.
The company reached $265 million in profits during the first quarter of 2022 which allowed it to obtain $300 million through its fourth round of financing while maintaining a market value of $13.3 billion. This enabled Peloton to start competing with large technology firms while conducting stock market transactions that attracted non-technical investors such as Ashton Kutcher and Kevin Durant.
The share sale during this ideal moment permitted Venzer and Atallah along with retired personnel to benefit from substantial portions of their invested money through the company stock appreciation.
The decline of the "NFT" trend
When OpenSea set its initial steps toward success during the middle of 2022 the NFT market dropped to $1 billion from an all-time high of $6 billion while the company posted earnings of $171 million.
Due to its backing of digital currencies "OpenSea" allocated substantial cash reserves into "Ether" currency at that time its market value led to losses exceeding $ 170 million. This eventually resulted in the company firing 20% of its workforce as investors along with founders voiced concerns about its future stability.
Atallah chose to leave his role in the company to develop his independent venture even though he remained part of its board of directors. Atallah disclosed that he started a dispute with Finzer about how they should propel the company forward. The company experienced a sales decline to $32 million as Finzer took over while Atallah left his position resulting in a 90% profit loss during the first quarter and missing $27 million from the company portfolios.
New competitor emerges
The evolution of OpenSea's challenges proceeded despite its market value decrease because Blur entered the market during the same period with a modified business model that led to increased popularity for the new platform over OpenSea.
Bloor surpassed Open Sea by three times in value during February 2023 while attracting more traders which diminished Open Sea’s profits to only $23 million in Q4 2022 and $19 million in Q1 2023.
The company attempts to recover by implementing "OpenSea 2.0" while federal investigations alongside workplace problems indicate an unfavorable outlook that risks unexpected bankruptcy.
