Cryptoverse: The bonfire of NFTs

The NFT dream isn’t dead, but it has tak­en a major, non-fun­gi­ble hit. The mar­ket shone glo­ri­ous­ly over the past year as cryp­to-rich spec­u­la­tors spent bil­lions of dol­lars on risky assets, send­ing prices and prof­its sky­rock­et­ing. Now, six months into 2022, things are look­ing ugly. Month­ly sales vol­ume on the largest NFT mar­ket­place, OpenSea, plum­met­ed to $700 mil­lion in June, com­pared to $2.6 bil­lion in May and a far cry from Jan­u­ary’s peak of near­ly $5 bil­lion. By the end of June, aver­age NFT sales had fall­en to $412 from $1,754 at the end of April, accord­ing to NonFungible.com, which tracks sales on the Ethereum and Ronin blockchains.

“The cryp­to bear mar­ket has def­i­nite­ly impact­ed the NFT space,” said Gau­thi­er Zup­pinger, co-founder of NonFungible.com. “We’ve seen so much spec­u­la­tion, so much hype around these types of assets,” he added. “Now we’re see­ing some kind of decline just because peo­ple real­ize they’re not going to be a mil­lion­aire in two days.”

The NFT mar­ket has col­lapsed along with the cryp­tocur­ren­cies nor­mal­ly used to pay for assets at a time when cen­tral banks have been rais­ing inter­est rates to fight infla­tion and risk appetite has waned. Bit­coin is down around 57% over the six months of the year, while Ether is down 71%.

For crit­ics, the crash con­firms the fol­ly of buy­ing such assets, trad­able blockchain-based records linked to dig­i­tal files such as images or videos, often works of art.
The Malaysian busi­ness­man, who bought an NFT of Jack Dorsey’s first tweet for $2.5 mil­lion last year, strug­gled to get bids in excess of a few thou­sand dol­lars when he tried to resell it in April.

But Benoit Bosc, glob­al head of prod­uct at cryp­to trad­ing firm GSR, sees the down­turn as the per­fect time to build a cor­po­rate NFT col­lec­tion — the cryp­to equiv­a­lent of the art that tra­di­tion­al banks show­case to impress clients.

Last month, GSR spent $500,000 on NFTs from what Bosc calls “blue-chip” col­lec­tions — those with a large online following.
Among his pur­chas­es is an NFT from Bored Ape Yacht Club, a set of 10,000 car­toon mon­keys made by US com­pa­ny Yuga Labs and pro­mot­ed by the likes of Paris Hilton and Jim­my Fallon.

Such is the hype sur­round­ing Bored Apes that in April, Yuga Labs raised $285 mil­lion by sell­ing tokens that are said to be exchange­able for land in a Bored Apes-themed vir­tu­al world, which it has yet to launch .
Still, the aver­age sell­ing price for a Bored Ape fell to around $110,000 in June, hav­ing halved since its peak of $238,000 in Jan­u­ary, accord­ing to mar­ket track­er CryptoSlam.

In his New York office, Bosc set up three screens on which to view his NFTs, includ­ing var­i­ous pix­e­lat­ed char­ac­ters and a bored mon­key that was pur­chased for $125,000.
“It’s also a brand exer­cise for us,” Bosc said. Own­ing a valu­able NFT and using it as your pro­file pic­ture on social media is a way to estab­lish “hon­esty, author­i­ty and influ­ence” in the cryp­to space, he said.

Nonethe­less, the future of NFTs is extreme­ly uncer­tain as the era of low inter­est rates comes to an end, encour­ag­ing investors to take risky bets.
Some mar­ket observers say that NFTs’ impact on the art mar­ket will shrink.

Although the much-tout­ed vision of a blockchain-based meta­verse is yet to mate­ri­al­ize, enthu­si­asts expect NFTs to dis­rupt the gam­ing indus­try, for exam­ple by allow­ing play­ers to own in-game assets like avatar skins.

“Every­one believes games are going to be the next big thing on blockchain,” said Mod­es­ta Masoit, chief finan­cial offi­cer at blockchain track­er DappRadar.
How­ev­er, this risky com­bi­na­tion of gam­bling and finan­cial spec­u­la­tion can encounter difficulties.

Accord­ing to John Egan, CEO of tech­nol­o­gy research firm L’Ate­lier, most gamers pre­fer games that don’t include NFTs or play-to-earn components.
Although the ground­break­ing new cryp­to reg­u­la­tions agreed by the Euro­pean Union last week large­ly barred NFTs, Spain is sep­a­rate­ly try­ing to curb the way video games are sell­ing vir­tu­al assets for real money.

Mean­while, the largest NFT-based game, Axie Infin­i­ty, has seen its in-game token col­lapse to less than half a cent from a peak of 36 cents last year.
L’Ate­lier’s Egan assumes that the NFT mar­ket will not recov­er in its cur­rent form.

“Ulti­mate­ly, it’s a sit­u­a­tion where extra­or­di­nary amounts are being paid for extra­or­di­nar­i­ly lim­it­ed assets that don’t pro­duce any real cash flow,” he said.
But the under­ly­ing con­cept of cre­at­ing unique dig­i­tal assets is still “fun­da­men­tal­ly impor­tant” and will have “mas­sive appli­ca­tions” for the finan­cial sec­tor in the future, he said.