Could an OpenSea IPO help scale the NFT Market?

by | Mar 25, 2022

By Charles-Henry Monchau, CIO at Syz Bank

Founded in 2017, OpenSea is the undisputed leader in NFTs (non-fungible tokens) exchange platforms. It is headquartered in New York City and currently employs over 400 people. It is led by its founders, Devin Finzer and Alexander Atallah, who together have nearly 20 years of experience in technology (Google, Palantir, Apple, etc.) and crypto-assets. In 2021, OpenSea facilitated nearly $23 billion worth of transactions on its platform. This very young company sees an IPO in late 2023 or 2024.


At the end of December 2021, OpenSea’s market share was over 65%, far ahead of its runner-up, Axie Infinity (11% market share). The rest of the market is rather fragmented with smaller players such as Rarible, Foundation, LooksRare (a newcomer), etc. Other players may soon enter the market (for instance, Coinbase is launching its own NFT marketplace).

As is the case for other exchange leaders (NYSE, Nasdaq, Coinbase, etc.), OpenSea should benefit from the network effect created by its leadership position. In other words, both buyers and sellers look for the marketplace with the highest volumes and the largest number of participants. As a result, the leader tends to reinforce its dominance over time.

In 2021, OpenSea facilitated $23.4 billion in transactions on Ethereum alone. By February 2022, the company had some 529,000 active traders (up from 274,000 and 16,000 in November 2021 and February 2021, respectively – source: Stableton), nearly doubling the number of active users every three months. Polygon-based volumes, while relatively small ($70 million in February 2022), also show strong traction.

NFTs, a “hyper growth” market

The NFT market has seen phenomenal growth in 2021, with transaction volume increasing more than 500-fold from FY 2020. According to research from NonFungible Corporation and OpenSea, the bulk of transaction volume since 2020 has been in Art (70%). The number of transactions is dominated by games and collectibles, which represent 40% and 37% respectively (source: Stableton).

The NFT market remains small and relatively concentrated for the moment. According to the Financial Times, 360,000 portfolios hold NFTs worldwide, and 9% of them represent 80% of the market in value (think of the high-profile transactions worth several million dollars that periodically make the headlines).

The capitalization of the NFT market is estimated at $710 billion for the year 2021 (source: Stableton).

OpenSea’s Revenue growth and profitability

OpenSea’s business model is based on fees collected from transactions made on the platform. The seller who pays a 2.5% commission to Opensea. This means that if you sell an NFT worth 100 ETH, you keep 97.5 ETH and OpenSea keeps 2.5 ETH (2.5%).

In December alone, OpenSea recorded $2.4 billion in transactions on its marketplace, according to TechCrunch. Over the year 2021, that volume was nearly $24 billion, or roughly a 200-fold increase year-over-year. Nearly half of these transactions were completed in the last quarter.

Note that despite the crypto-currency crash seen earlier this year, the NFT market has proven resilient (see our previous analysis). January and February 2022 were the two best months on record for OpenSea.

According to many experts, the NFT market is still in its infancy and the growth potential is exponential. Most large corporations are now interested in NFTs and these tokens should benefit from the rise of the Metaverse. While OpenSea users have grown from 16,000 a year ago to over 500,000 today, these numbers are still very low compared to other trading platforms (for example, eBay has an average of 160 million active buyers).

With regards to profitability, Opensea has reached breakeven well before other crypto asset platforms such as Coinbase or Kraken and this can be explained by its relatively high transaction fees (2.5% charged to the seller).

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