{"id":70073,"date":"2023-10-02T00:08:50","date_gmt":"2023-10-02T04:08:50","guid":{"rendered":"https:\/\/world.edu\/?p=70073"},"modified":"2023-10-02T00:08:50","modified_gmt":"2023-10-02T04:08:50","slug":"are-nfts-really-dead-and-buried-all-signs-point-to-yes","status":"publish","type":"post","link":"https:\/\/world.edu\/are-nfts-really-dead-and-buried-all-signs-point-to-yes\/","title":{"rendered":"Are NFTs really dead and buried? All signs point to \u2018yes\u2019"},"content":{"rendered":"

\"\"<\/p>\n

Non-fungible tokens (NFTs) are in dire straits. With the market in a severe downturn, it\u2019s safe to assume the NFT bubble has well and truly burst.<\/p>\n

It was never clear why these digital collectables traded for such large amounts of money. Now they mostly do not. What\u2019s behind their turn of fate? And is there any hope for their future?<\/p>\n

What are NFTs?<\/strong><\/h4>\n

Non-fungible tokens are a blockchain-based means to claim unique \u201cownership\u201d of digital assets. \u201cNon-fungible\u201d means unique, as opposed to a \u201cfungible\u201d item such as a five-dollar bill, which is the same as every other five-dollar bill.<\/p>\n

But just because an item is unique that doesn\u2019t make it valuable. Digital assets are easily copied, so an NFT is essentially a receipt showing you have paid for something that other people can get for free. This is a pretty dubious basis for value.<\/p>\n

The\u00a0two most traded sets of NFTs<\/a>\u00a0are the Bored Apes collection created in April 2021 and the CryptoPunks collection launched in June 2017.<\/p>\n

Both sets consist of 10,000 similar-looking but unique figures, distinguished by differing hairstyles, hats, skin colours and so forth. The\u00a0Bored Ape<\/a>\u00a0character seems derivative of the drawings of Jamie Hewlett, the artist who drew Tank Girl and Damon Albarn\u2019s virtual band\u00a0Gorillaz<\/a>. The\u00a0CryptoPunks<\/a>\u00a0are even less interesting.<\/p>\n

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The CryptoPunk NFTs are basic computer-drawn faces. Wikimedia<\/p><\/div>\n

Why did people buy NFTs?<\/strong><\/h4>\n

Although the first NFTs emerged around a decade ago, the trend really started to take off in 2021. And for a time NFTs were very fashionable.<\/p>\n

Even the venerable auction house\u00a0Sotheby\u2019s<\/a>, founded in 1744, jumped on the NFT bandwagon. Sotheby\u2019s sold 101 Bored Ape NFTs for more than US$20 million in September 2021. They\u2019re now facing a\u00a0lawsuit<\/a>\u00a0from a disgruntled buyer.<\/p>\n

As with Bitcoin and similar speculative tokens, the primary driver for buying NFTs\u00a0was greed<\/a>. Seeing the initial price rises, people hoped they too could make huge profits. NFTs are essentially a superficially sophisticated form of gambling.\u00a0Like Bitcoin<\/a>, they have no fundamental value.<\/p>\n

Generally, one would only profit from buying an NFT by finding a \u201cgreater fool<\/a>\u201d willing to pay even more for it. So there was never a shortage of people \u2013 including\u00a0some quite<\/a>\u00a0famous ones<\/a>\u00a0\u2013 talking them up and hoping to instil a fear of missing out.<\/p>\n

Eminem bought a Bored Ape that looked a bit like him. Rapper KSI\u00a0boasted on Twitter<\/a>\u00a0about his Bored Ape rising in price.<\/p>\n

For a while there were large increases in the prices of many NFTs. But like all speculative bubbles, it was likely to end in tears. Although it\u2019s almost impossible to predict when a bubble for a speculative asset will burst, we have seen this process play out before.<\/p>\n

Centuries ago there were the\u00a0Dutch tulip<\/a>,\u00a0South Sea<\/a>\u00a0and\u00a0Mississippi<\/a>\u00a0bubbles. Around 1970, there was a speculative bubble in the shares of\u00a0nickel miner Poseidon<\/a>. Then came the\u00a0Beanie Baby<\/a>\u00a0and\u00a0dotcom<\/a>\u00a0booms of the late 1990s \u2013 and more recently,\u00a0meme stocks<\/a>\u00a0and\u00a0Terra-Luna cryptocurrency<\/a>.<\/p>\n

The NFT crash<\/strong><\/h4>\n

Punters now seem to be as bored with NFTs as the apes. Google searches for \u201cNFT\u201d \u2013 which grew rapidly through 2021 \u2013 have\u00a0fallen away<\/a>\u00a0dramatically. Trading volumes\u00a0have collapsed<\/a>.<\/p>\n

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Google searches for \u2018NFT\u2019 reached an all-time high around early 2022. Author provided\/Data from Google Trends<\/p><\/div>\n

Prices in the NFT market have also seen huge falls. The prices of Bored Ape NFTs are\u00a0down about<\/a>\u00a090% from their peak. The CryptoPunks have done\u00a0slightly better<\/a>\u00a0by losing only 80%.<\/p>\n

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The value of Bored Ape NFTs has fallen dramatically since March of last year. Author provided\/Data from Coingecko.co<\/p><\/div>\n

A recent\u00a0report<\/a>\u00a0covering about 73,000 NFTs estimated 70,000 are now valued at zero. This leaves 23 million people holding a worthless \u201casset\u201d.<\/p>\n

One\u00a0high-profile example<\/a>\u00a0is an NFT of the first tweet by then-Twitter CEO Jack Dorsey. Crypto entrepreneur Sina Estavi\u00a0bought this NFT<\/a>\u00a0for US$2.9 million in March 2021. When he tried to sell it a year later the top bid\u00a0was US$6,800<\/a>.<\/p>\n

What drove the NFT collapse? As well as losing their novelty, the market was hurt by the large falls in the price of Bitcoin and other cryptocurrency, as well as the collapse of the\u00a0FTX exchange<\/a>\u00a0and\u00a0publicity given to scams<\/a>.<\/p>\n

Beyond that, the lifting of COVID lockdowns meant people who began trading NFTs now had\u00a0other ways to pass their time<\/a>. And higher interest rates from mid-2022 made most speculative assets seem less attractive.<\/p>\n

Collectively, all of these factors made NFTs seem like a riskier proposition. Prominent people started jumping off the bandwagon. Some of\u00a0KSI\u2019s<\/a>\u00a0later tweets lament the losses he suffered from his gambles.
\n

<\/p>\n
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Time to make money the old fashioned way. Through hard work lmao #Pain<\/a><\/p>\n

— KSICRYPTO (@ksicrypto) May 19, 2021<\/a><\/p><\/blockquote>\n