There are about 23 million people who currently own an NFT (non-fungible token, a type of cryptographic good that certifies the authenticity of a work of digital art, a video, an image or a text), with practically zero economic value . This is what emerges from a recent study by the consulting firm dappGambl, which has analyzed the NFT Scan and CoinMarketCap databases, for a total of more than 73,000 digital artistic collections. 95% of them are worth zero right now when in 2021 some of them reached million-dollar quotes. Four out of five of these cryptographic works have no owner: they have not even been sold. They have no market.
The harshest judgment on this asset has been given by Matthew Levine, a former Goldman Sachs banker who is now an opinionist and essayist on these issues for Bloomberg. “NFTs are a Ponzi scheme.” That is, a fraud. Without going to these extremes, what can be said is that there was a bubble. And now it has punctured.
“One of the evidence of this drop is that, according to our report, 35% of online art buyers indicate that their intention is to sell their NFT and furthermore, that a third of buyers do not know what to do with them,” he highlights. Eva Peribáñez, director of the Art and Private Client division of Hiscox Spain, a firm that has prepared a report on the sector. “One of the main reasons why NFTs were interesting was because of their potential return on investment. However, only 12% of these buyers say they will purchase one this year,” she explains.
What are the causes of the collapse? It does seem that there is a relationship between a fall in 2022 in cryptocurrencies such as Luna and Terra and the FTX platform, which abruptly dragged down the prices of NFTs, the value of which is negotiated with these digital currencies. Just a year ago, NFT sales began to collapse by more than 90% in almost all metrics – including volume and price – compared to the previous year. The OpenSea platform, one of the largest NFT markets, fell from $5 billion in January 2022 to just over $400 million today.
NFTs seduced even famous names, attracted by the promise of having the artistic forms of the future in their hands. For example, the singer Justin Bieber paid about 1.3 million dollars to get a copy of the Bored Ape Yacht series that today is worth less than 60,000 (that is, a depreciation of 95%). Youtuber Logan Paul paid $623,000 for the On1 Force, which today is barely worth tens of euros and has made his displeasure public on social media.
According to the annual report on the art market prepared by Claire Andrews of the UBS bank, considered by experts to be the bible of the sector, “the high liquidity and ease of access have attracted very speculative buyers. In fact, the average time between purchase and subsequent resale in 2021 was only 33 days. Between 2020 and 2021 prices multiplied by twenty. Pseudonyms and the anonymous nature of the transactions also played a role. Currently more than half of the operations are resale on the secondary market.” Owners are looking to get rid of NFTs rather than buy new ones.
According to Llucià Homs, art critic and expert on the art market, “what has become clear is that the mere fact of being NFT no longer justifies per se a premium in the valuation of an artistic work, because all works can pass through a digitalization process.” In his opinion, “this bubble barely leaves a new audience of collectors. Many of them were just speculators, who invested to the tune of cryptocurrencies.”
