Source: Sipa Asia / Shutterstock
Source: Sipa Asia / Shutterstock
Prices for digital collectibles like arts and sports memorabilia are dropping, returning the focus to whether the burgeoning market for so-called non-replaceable tokens is more than a fleeting mania.
Average prices for NFTs – essentially tradable digital certificates that use blockchain technology to prove ownership and origin of online assets – are down nearly 70% from a peak in February to about $ 1,400, according to Nonfungible.com, which maintains various NFT marketplaces.
A burst of interest in NFTs peaked last month when a Beeple digital artwork sold for a staggering price. $ 69.3 million. For some, that amount showed that NFTs were in the throes of investor surpluses in a world full of incentives and destined to hiss. Others studying the technology argue that using blockchain to create scarcity for digital collectibles is a lasting innovation rather than a price hike.
“It doesn’t make sense to label a concept as a financial bubble,” he said Chris Wilmer, an academic from the University of Pittsburgh working together on a blockchain research journal“’NFTs’ are no more in a bubble than ‘cryptocurrency’ is a bubble. There will be manias and irrational exuberance, but cryptocurrency is clearly here to stay with us for the long haul and NFTs probably too. “
Pierced
The NFT boom hissed as prices cooled from a peak in February
Source: Nonfungible.com
The sale of blockchain-based digital assets was already underway in 2018, when 10 collectors Paid $ 1 million for a digital photo of a rose. Today tweets, baseball clips and even comic digital characters are also traded as NFTs.
Read more: Crypto Investor moves on to Picasso after that $ 69.3 million NFT Miss
Read more: Digital Art Mania declines after breakout month of sales
Companies want to expand applications of the technology. While digital art is “frothy,” music and film can provide viable NFT ventures, said Kathleen Breitman, the co-founder of blockchain platform Tezos. There are even questions about loans against NFTs, she said.
Researchers have also started examining whether NFTs have low correlations with other investments, including cryptocurrencies such as Bitcoin, hinting at a potential, but very controversial role in wallet diversification.
At the same time, NFTs are far from risk-free, whether due to further price declines, ostensibly wash trading – where deals that look real are actually done by small groups to create the illusion of high demand – or just plain fraud.
‘Scammers’
“While the cryptography that enables NFT art makes it easy to verify its provenance, it is still easy to be fooled by forgeries if you are a non-expert user who doesn’t know how to own the artwork. Authenticate securely, ”said Wilmer of the University of Pittsburgh. “Expect a lot of scammers to take advantage of this.”
While trading volumes and average prices are much lower than recent spikes, other data shows that many NFTs are still making significant gains for 2021. In the first quarter, the market value of 38 NFTs tracked by CoinMarketCap increased more than eight-fold to $ 22.5 billion.
Time will tell if the NFT boom is deflating, or if the volatility is part of a new market going through a period of price discovery. On the one hand, the pandemic and subsequent lockdowns have accelerated the final process.
“The interest in building a persona – and owning things – in the digital world has been bubbling up for years,” said Berna Bershay, an analyst at Empire Financial Research. “With so much time spent online in the past year, the desire to own digital assets was likely dragged on by the Covid-19 crisis for several years.”
– With the help of Sunil Jagtiani