The once-sizzling market for NFTs has become a spectacular bust as high-profile auctions increasingly fail and investors who splurged millions on bizarre digital artworks now struggle to sell them at a tiny fraction of their price.
Last spring, little-known crypto artist Beeple sold an NFT for a staggering $69 million. This month, he revealed he spent a year collaborating with Madonna to create a trio of racy NFTs that featured the “Material Girl” giving birth to a tree, centipede and butterflies.
They sold for $135,000, $346,000 and $146,000 respectively.
“It was unexpectedly low,” Nick Rose, founder and CEO of NFT platform Ethernity Chain, told The Post.
The flop wasn’t unusual, however, amid the carnage that has recently engulfed so-called NFTs, or non-fungible tokens, which are unique digital assets on the blockchain often used for art. Last March, Bridge Oracle CEO Sina Estavi bought an NFT of Twitter co-founder Jack Dorsey’s first tweet for $2.9 million, dubbing her the “Mona Lisa of the digital world.” Last month, he abandoned an auction to resell it after the top bid was below $14,000.
“This has been fueled by ridiculously inflated cryptocurrency prices and hysterical bidding,” Jeff Bell, CEO of LegalShield, a consumer legal protection firm, told The Post. “It’s no different than the gold rush or the dot-com bubble, where people overtake themselves — everyone wants to get rich quick.”
NFTs are being squeezed in part because cryptocurrencies – the payment method of choice for NFT sellers – are tanking alongside tech stocks while the Fed hikes rates amid raging inflation. bitcoin BTCUSD,
58% below its all-time high of $69,000 in November. ethereum ETHE,
— the most widely used cryptocurrency on NFT platforms — is also down 60 percent.
The numbers for NFTs look even worse. According to NonFungible, sales are hovering around 24,000 a day this week, down from a high of 225,000 a day in September. Cash spent on NFTs has also fallen sharply, with sales totaling $205 million last week — nearly 90% down from its August high of nearly $1.9 billion, according to the research firm.
“NFTs exploded when stimulus checks hit, but they grew too fast,” Rose said. “We’re going through a cooldown with the stock market, inflation, COVID and Ukraine.”
Of even greater concern, according to some insiders, the Bored Ape Yacht Club — whose cartoon depictions of sprawling but smartly dressed primates have grossed an estimated $2 billion since their launch a year ago — has recently seen awards for its NFTs tank. This week, the cheapest price available on the OpenSea NFT marketplace was quoted at around $183,135 – a sharp drop from an all-time high of $429,000 set earlier in the month.
The drop came after Elon Musk changed his Twitter profile to a collage of Bored Apes he swiped from a Google search — mocking a current craze that has seen celebrities like Justin Bieber, Paris Hilton, Jimmy Fallon and Steve Aoki blew up hundreds of thousands of dollars to claim a one-of-a-kind, authentic Bored Ape. “Seems kind of reasonable,” Musk tweeted.
Still, Bored Ape Yacht Club creator Yuga Labs claimed that a recent launch of real estate in the metaverse went “unexpectedly.” And earlier this year, Snoop Dogg released a collection of NFTs that grossed $44 million in five days. Experts say that’s because personalities like Snoop and Bored Ape have built relationships in the niche.
“Key players like Snoop Dogg did a lot of community building,” Rose said. “Nobody spends millions on individual items…the mania has faded,” but building a loyal following in the NFT space will support some creators, according to Rose.
Meanwhile, signs of broad weakness are mounting. CryptoPunk #273 – by an NFT collective called CryptoPunk, which by all accounts has built a cult following in space – sold for $1 million six months ago. Earlier this month it cost $140,000. In February, Reese Witherspoon’s media company Hello Sunshine partnered with NFT collective World of Women. The minimum buy-in for an NFT has since fallen from $34,000 to $10,000.
Worries about counterfeiting and outright theft didn’t help. The Winklevoss twins — who own and operate Gemini cryptocurrency exchange and bought NFT platform Nifty Gateway — have lost part of their digital art cache after they were sued by a user who claims he cheated at an auction been led and tricked into buying a $650,000 NFT. I do not want.
“A lot of collectors I know don’t trade there anymore,” Rose said. “I don’t.”
A spokesman for the Winklevoss twins did not respond to a request for comment.
According to one report, 50% of all NFT owners have lost access to their NFTs. A user on Discord, a popular messaging app in the crypto and NFT world, recently posted that out of frustration he omitted that it was a hotbed of NFT chatter. “NFTs are a scam in many cases,” the user said, adding that a growing number of investors are “completely screwed by NFTs.”
The number of active NFT buyers and sellers has leveled off at around 500,000 in the second quarter – down from almost a million in the first quarter and around 700,000 in the fourth quarter of 2021.
Ian Rosen, a partner at The Tifin Group and former StockTwits CEO, likened the NFT craze to an obsession with cabbage patch dolls or beanie babies.
“People are like, ‘Hey, I took a picture and put it on OpenSea!'” Rosen said. “But just because it exists in the digital world doesn’t make it valuable.”
Still, those in the NFT space remain optimistic.
“With almost $8 billion traded in the first quarter of 2022, you can’t really assume the market has collapsed. We’re seeing more of a form of stabilization,” NonFungible notes in a recent report.
However, critics point out that it can be difficult to determine what companies are measuring and whether it is accurate. For example, wash trading – when sellers buy their own NFTs using two different accounts – can make platforms appear to have more activity than they actually have.
“You can’t sell a fake Rembrandt, but we don’t see that kind of control here, so people get burned,” says Bell. “There are instances of apparent fraud where people inflate the price of NFTs by buying their own.”
That points to a broader problem with NFTs: the burgeoning sector is still new and largely unregulated. Until it’s a more regulated area, it’s up to users to protect their wallets.
“Mom and dad aren’t going to protect you,” Rosen warns. “If you don’t know who the sucker is at the poker table, then you are.”
This article was first published on NYPost.com