The Magic Eden after the launch coin: Opportunities and challenges in the multi-chain Non-fungible Token market

Written by Riffi / MAT / Darl

Editing and proofreading: Nora

Source: WolfDAO

1. Project Overview

Magic Eden is a multi-chain supported non-fungible token (NFT) trading marketplace that has quickly emerged as one of the leading platforms in the market by leveraging its presence in multiple blockchain ecosystems such as Solana, Ethereum, Polygon, and Bitcoin. Since its launch in September 2021, Magic Eden has rapidly expanded its market share through its cross-chain marketplace and innovative features, especially after integrating Bitcoin Ordinals, making it a significant player in the field. This research aims to analyze its economic model, market position, and future development direction to assess its future growth potential.

II. Market Performance and Competitive Analysis

1. Market Sentiment and Token Performance

source: coinmarketcap

The ME token was first released in August 2024 and is planned to have its Initial Token Generation Event (TGE) in December. The initial market sentiment was positive, but according to the current market trend, the price of the ME token failed to meet expectations and showed a trend of opening high and closing low. After falling below $3, the price rebounded to around $3.3, with a circulating market value of $424 million and a Fully Diluted Valuation (FDV) of $3.264 billion. One of the main reasons for this phenomenon is the overall market downturn, especially the weakness in the altcoin market. However, the continuous decline in token price without effective support also reflects investors' cautious attitude towards the platform's future prospects. This phenomenon indicates that the overall NFT market and altcoin market are sluggish, and investors are taking a wait-and-see approach to future growth.

2. Market Share and Competition

source: nftpluse

Magic Eden dominates in the Solana and Bitcoin ecosystems, especially in the Bitcoin Ordinals and Runescape NFT markets with a market share of over 80%. However, facing the market giants on the Ethereum chain such as OpenSea and Blur, Magic Eden still faces tremendous competitive pressure. OpenSea remains the leader in the Ethereum market, while Blur has gained a competitive advantage in the high-end NFT market through low transaction fees and frequent trading.

Competitor analysis:

Currently, the main competitors in the market are OpenSea, Magic Eden, and Tensor. In terms of user data, OpenSea and Magic Eden have established strong positions in their respective ecosystems. OpenSea maintains an absolute dominant position on the Ethereum mainnet and its layer 2 networks due to its first-mover advantage, while Magic Eden holds the majority share in the Solana and Bitcoin ecosystems. The future competition between the two will mainly depend on further development and user growth in their respective markets.

In the Solana market, Magic Eden's direct competitor is Tensor, but Tensor's weaknesses are quite obvious. First, the user quality of Tensor is relatively low, and many low-royalty transactions have attracted a large number of retail investors, resulting in low user loyalty and average transaction prices far lower than other platforms.

source: nftpluse

Main Competitors:

OpenSea: It occupies a leading position in the Ethereum ecosystem and maintains its market-leading position based on its strong brand effect and user base.

Blur: Focuses on low fees and high-frequency trading, attracting a large number of high-end NFT traders, especially excelling in trading high-value assets.

Tensor: mainly competes in the Solana market. Although it has gained a certain market share on the chain, there is still a gap in user groups and market depth compared to Magic Eden.

In the short term, it is not easy to shake the strong position of Magic Eden in the Solana and Bitcoin markets, especially after the TGE, the increase in its funds and exposure may further expand its advantage. However, Magic Eden's biggest challenge remains breaking the monopoly of Blur and OpenSea in the Ethereum market. Although Bitcoin's Ordinals and Inscriptions once experienced a boom, its market stability is far less than that of Ethereum. Even in the downturn of the Ethereum NFT market, OpenSea and Blur still dominate the majority of blue-chip projects, with stronger community cohesion and market recognition. It is said that 'Blur holds the big players, while OS occupies the retail investors.'

3. Market Analysis Summary

source: nftpluse

Although the ordinals and inscriptions of Bitcoin have surged at one time, its market stability is far inferior to that of the ETH market. Even in the extremely sluggish situation of the Ethereum NFT market, it still monopolizes several recognized blue chips, with a leading community cohesion and recognition. On the other hand, SOL and BTC, although the prices of Bitcoin Frogs and others have once surpassed BAYC, are also short-lived and soon fade away after the heat. If Magic Eden cannot bring out some evergreen projects in the future, the protocol's sustained profitability still needs to be observed.

3. Economic Model and Token Economics Analysis

4. Token Issuance and Distribution

The total supply of Magic Eden's token ($ME) is 1 billion, and it is planned to be gradually issued within 4 years. More than half of the tokens will be allocated to the community, with the specific distribution as follows:

Initial Token Claim (12.5%)

A portion of the initial airdrop will be fully unlocked during the Token Generation Event (TGE) and distributed to active users from ecosystems such as Bitcoin, Solana, and Ethereum. These users will become part of the Magic Eden DAO. The unclaimed portion will be returned to $ME staking users as part of future community rewards.

Community and Ecosystem (37.7%)

Active User Incentives (22.5%): This portion will be distributed through Magic Eden's incentive program, mainly used to reward active users and distributed through the platform's mobile decentralized applications (dApps).

Ecosystem development (15.2%): This includes long-term investments in the ecosystem to support creators and active advocates. This portion of the funding will be provided through long-term agreements to ensure long-term participation of stakeholders. In addition, 5% of the ecosystem development funds will be allocated to the Magic Eden Foundation treasury for protocol support and liquidity provision.

Contributors (26.2%)

This portion is primarily allocated to advisors, contractors, and platform employees who support the Magic Eden protocol and platform. In order to ensure long-term commitment, core contributors (accounting for over 60% of the total contributor tokens) will be locked up for 18 months after the TGE and gradually unlocked thereafter.

Strategic partner (23.6%)

Strategic partners provide important support for the development of the Magic Eden Foundation agreement, and all strategic participants will lock their tokens for at least 12 months after TGE, and token unlocking will follow the designated token release schedule.

Overall, this structure does not introduce any particularly innovative mechanisms, mainly relying on conventional staking transactions and community governance to promote user participation and ecosystem development.

The initially released tokens account for 12.5% of the total, which may exert certain selling pressure on the market. However, as unclaimed tokens will return to the staking reward pool, and early investors usually tend to take a wait-and-see approach, the short-term impact is relatively controllable.

The unlocking of tokens for mid-term contributors and strategic partners may gradually increase market supply, and during this stage, the market may experience significant fluctuations. If there is insufficient market demand at this time, token prices may face downward pressure.

If Magic Eden can attract more users through ecological expansion and innovative features, its token selling pressure may be digested by strong demand.

2. The sustainability of the economic model

source: nftpluse

Magic Eden's profit model currently relies mainly on transaction fees and market income. The platform's multi-chain strategy, especially the deep integration of Solana and Bitcoin, enables it to gain trading volume from users of different chains. However, with the intensification of market competition, especially in the competition on Ethereum and Layer-2 solutions, Magic Eden needs to enhance the diversification of its profit model through innovative ecosystems and product features.

Magic Eden platform's trading revenue in the month before the coin issuance was $2.8 million, with a market share of 45.4%, leading the second-ranked OpenSea by about $600,000. This revenue is 9.3 times that of the already issued Blur platform's revenue ($301,000), and such revenue remains strong after the airdrop. The revenue in the last 24h and 7d is $91k and $1.1M respectively. Although the market share has been surpassed by OpenSea due to the recent resurgence of Ethereum blue chips, it still demonstrates relatively strong profitability. Nevertheless, based on Magic Eden's past year's revenue of $60 million, its price-earnings ratio (PE) is 50, and recent revenue decline indicates certain pressure on its long-term profitability and market valuation. Although the market value evaluation of Web3 projects is more complex than traditional markets, it is still an important reference indicator.

4. Challenges and Future Outlook

5. Market bottleneck

Despite Magic Eden's dominant position in the Solana and Bitcoin ecosystems, competition in the Ethereum ecosystem remains a significant challenge. The strong positions of OpenSea and Blur in the Ethereum market put significant pressure on Magic Eden to attract Ethereum users.

2. Token Unlocking and Market Selling Pressure

The distribution structure of ME token is relatively aggressive, especially with few tokens released in the early stage. The large number of unlocks in the later stage may increase the market supply and put pressure on the token price. This unlocking mechanism may cause price fluctuations and exacerbate market instability.

3. Lack of innovation and ecosystem expansion

The current investment in innovative products and ecological construction of Magic Eden is still insufficient. The platform needs to accelerate the innovation and expansion of the ecosystem, especially in terms of cross-chain support, differentiation of NFT market functions, and improvement of community governance.

Conclusion

Magic Eden has demonstrated a solid position in the industry with its market share and revenue capabilities in Solana and the Bitcoin ecosystem. However, its token, $ME, has faced multiple challenges since its launch, such as lack of market confidence, fierce competition, and unlocking selling pressure. In the competition with Blur and OpenSea, it is crucial to break through the bottleneck of the Ethereum market. In the future, the platform needs to strengthen the tokenomics design, improve the ecological construction and user stickiness, and lead the market through innovative products to continue to consolidate and expand its leading position.