Source: Sipa Asia / Shutterstock
Source: Sipa Asia / Shutterstock
The prices of digital collectibles, such as art and sports memorabilia, are falling, turning the focus on the question of whether the nascent market for so-called non-fungible tokens is more than a passing craze.
Average prices for NFTs – essentially tradable digital certificates that use blockchain technology to prove ownership and provenance of online assets – have dropped nearly 70% from a peak in February to around $ 1,400, according to Nonfungible.com, which tracks a variety of NFT markets.
An explosion of interest in NFTs peaked last month, when a digital work of art by Beeple was sold by an incredible $ 69.3 million. For some, this sum showed that NFTs were in the grip of excess investor in a world full of stimuli and destined to fail. Others who study the technology argue that using blockchain to create scarcity of digital collectibles is a lasting innovation, not a fad.
“It makes no sense to characterize a concept as a financial bubble,” he said. Chris Wilmer, a scholar from the University of Pittsburgh who co-eds a blockchain research journal. “’NFTs’ are not in a bubble any more than ‘cryptocurrency’ is a bubble. There will be crazes and irrational exuberance, but cryptocurrency is clearly here to stay with us for the long haul and NFTs probably too. “
Pierced
Boom NFT has failed with the cooling of prices since the peak of February
Source: Nonfungible.com
Sales of blockchain-based digital assets were already underway in 2018, when 10 collectors paid $ 1 million for a digital image of a rose. Today, tweets, baseball clips and even digital comic characters are also traded as NFTs.
Read more: Crypto Investor switches to Picasso later $ 69.3 million NFT Miss
Read more: Digital Art Mania decreases after month of extraordinary sales
Companies are looking to expand applications of the technology. While digital art is “sparkling,” music and film can provide viable NFT endeavors, said Kathleen Breitman, co-founder of the blockchain platform Tezos. There are even emerging questions about loans against NFTs, she said.
The researchers also started to ascertain whether NFTs have low correlations with other investments, including cryptocurrencies such as Bitcoin, suggesting a potential, although highly controversial, role in portfolio diversification.
At the same time, NFTs are far from being risk-free, whether due to further price drops, the so-called wash trading – where deals that look genuine are actually done by small groups to create an illusion of high demand – or pure fraud.
‘Scammers’
“While the encryption that powers NFT art makes authentication of provenance easy, it is still easy to be fooled by forgeries if you are a non-expert user who does not know how to securely authenticate the work of art,” said Wilmer of the University of Pittsburgh. . “Expect to see many scammers taking advantage of this.”
Although trading volumes and average prices are much lower than recent peaks, other data shows that many NFTs are still sitting on substantial gains for 2021. During the first quarter, the market value of 38 NFTs monitored by CoinMarketCap rose more than eight times for $ 22.5 billion.
Time will tell if the NFT boom has deflated or if volatility is part of a new market in a period of price discovery. On the one hand, the pandemic and subsequent blockades have accelerated the latter process.
“The interest in building a personality – and owning things – in the digital world has been bubbling up for years,” he said Berna Bershay, an analyst at Empire Financial Research. “With so much time spent online last year, the desire to own digital assets has probably been swept away several years by the Covid-19 crisis.”
– With the help of Sunil Jagtiani