Crypto exchange Kraken to launch NFT marketplace

Yahoo Finance's David Hollerith discusses Kraken's plans for an NFT platform.

Video transcript

BRIAN CHEUNG: Crypto exchange Kraken will roll out its very own non-fungible token, or NFT, platform in the coming months. For more on this, let's bring in Yahoo Finance's David Hollerith, who's got the story. David.

DAVID HOLLERITH: It's still quite new. The NFT trading business is getting more competitive by the week. Yesterday, I spoke with Kraken's chief operating officer David Ripley about it. Despite the crypto exchange's late entry to NFTs, he said the market is still in its infancy and compared it to cryptocurrency in the early-2010s. Here's a snippet from that conversation.

DAVID RIPLEY: We see over the next several years-- five years, 10 years-- the same type of trajectory and total market size that could come to fruition for NFTs. So we truly view it as a massive opportunity and massive potential market. We think it's bringing something to the world from a technology standpoint that really doesn't exist in the traditional world in the same way.

DAVID HOLLERITH: The most intriguing feature of Kraken's NFT trading platform is that they're promising to subsidize gas fees or the costs of making a transaction across Ethereum and other proof of stake blockchains, like Solana. Now, gas fees spike during periods of high network activity, sometimes the levels that put the fees on par with the cost of the actual NFT themselves.

Gas fees on Ethereum have resurfaced as a bigger blockchain problem Thanks to a record launch for virtual land by Bored Ape Yacht Club creator over the weekend, Yuga Labs. And Yuga Labs-- the sale that Yuga Labs pulled off this weekend netted $320 million, but an additional $180 million was paid in transaction costs. Some of those transactions are failing for users.

Now, Yuga Labs has promised to refund investors for the transactions which have failed, but the incident sort of drives home this point of how significant paying gas fees could be for customers. I spoke with Mason Nystrom, a senior research analyst with Messari, about this, and he pointed out that a platform that pays zero gas fees or subsidizes them in some way could be a major boon for users.

And he likened it to sort of how Robinhood, the trading app, has attracted more customers from other brokers by removing trading fees. So while Kraken's Ripley wouldn't offer an exact timeline for the date of the platform's launch or how exactly they would subsidize gas fees, in a blog post announcement they stated they would not cover gas fees when customers are transacting off its platform.

So at this point, there's no exact timeline for the platform's rollout. It's said to be launching at some point in the coming months. But until then, customers can sign up for the waitlist on Kraken's website.

AKIKO FUJITA: So, David, when you consider how cryptocurrencies have performed so far this year, how has that affected investor interest in the NFT market?

DAVID HOLLERITH: Yeah, Akiko, the actual reception of how the NFT market is doing is particularly mixed right now. So between Saturday and Sunday, largely thanks to the Bored Ape Yacht Club creator Yuga Labs' record land sale, OpenSea, the largest NFT platform, had one of their-- I believe their highest record day of trading for NFTs in daily volume. But added to that, NFT interest has waned a lot in terms of search volume if we look at something like Google Trends.

It's fallen roughly 80% since its peak in January. So we're seeing a pretty significant mix in the market. The greatest example of lack of NFT interest, I think, is probably Jack Dorsey's NFT. He minted an NFT of his first tweet on Twitter and that sold for $2.9 million back in 2021-- March of 2021. And last week-- sorry, excuse me, last month, the buyer of that NFT tried to sell it on OpenSea, and they couldn't receive bids higher than $14,000 for resell.

So you know, I think what we're seeing here is that the market in general is definitely seeing waning interest, but there are specific projects, particularly outliers like Bored Ape Yacht Club, that are continuing to see demand. But finally, probably the key difference here is that we're not seeing a lot of new buyers anymore. We're seeing a pretty strong separation that most of the buyers are returning-- meaning that if the market is hoping to grow much more, they need to figure out how to attract new and NFT buyers.

BRIAN CHEUNG: Yeah, for sure-- liquidity definitely an issue in this burgeoning market. Yahoo Finance's David Hollerith, thanks so much for the breakdown there.