OpenSea investor reduces valuation in platform by 90%: Report

United States tech investment firm Coatue Management has drastically reduced its valuation of the non-fungible token (NFT) platform OpenSea. Recent documents reviewed by The Information on November 7 reveal a sharp 90% markdown, reducing Coatue’s investment from $120 million to $13 million.

Consequently, the implied valuation of OpenSea has plummeted to $1.4 billion. This downward adjustment also reflects on Web3 payment provider MoonPay, experiencing a similar valuation cut by Coatue.

The recalibration of OpenSea’s worth follows what was a robust investment phase in January 2022. Coatue, along with crypto venture capital firm Paradigm, spearheaded a $300 million Series C funding round. The substantial cash injection previously skyrocketed OpenSea’s valuation to about $13.3 billion. However, a sustained bear market and declining NFT trading activities have necessitated a strategic reevaluation.

Operational restructuring Amid industry turbulence

The NFT industry’s vitality is waning. It soared to unprecedented heights in 2021, with sales crossing the $14 billion mark. Yet, the once-thriving sector is now witnessing a slump, with a notable 80% dip in trade volumes since March 2022. Significantly, a report from DappRadar on Nov. 3 highlighted a silver lining with the market’s first increase in gains month-over-month in over a year. October’s figures show a $99 million surge despite the persisting downturn.

In response to these challenging market conditions, OpenSea announced a drastic 50% workforce reduction as of Nov. 3. CEO Devin Fizner unveiled plans to rejuvenate the platform with the launch of OpenSea 2.0. This strategic pivot aims at technology enhancements alongside improving speed and service quality. Fizner believes a leaner team is key to maintaining agility and attentive customer service. This shift follows OpenSea’s controversial decision in August to phase out its operator filter, a measure to curb marketplaces circumventing creator royalties.

Despite early indicators of a crypto winter thaw, NFT sales struggle to gain momentum. Weekly NFT transactions have fallen from roughly 176,000 at the year’s onset to about 23,000 recently. Similarly, the market tracker shows weekly sales values have halved, from $118 million to $62 million. Additionally, Nansen.ai’s NFT-500 index reflects a 55% drop year-to-date, further corroborating the sector’s retreat.

OpenSea investor sentiment has undoubtedly been impacted by these developments. The platform, once a crown jewel of the NFT world, now faces the challenge of navigating a market that has significantly contracted. Moreover, the broadscale reassessment by investors like Coatue underscores a heightened level of caution and realism pervading the digital asset space.