The world of investments has witnessed a penchant for fads and trends in recent times, with non-fungible tokens (NFTs) emerging as a particularly peculiar phenomenon that captured widespread attention. The extraordinary nature of NFTs left even cryptocurrencies seeming straightforward by comparison, as the frenzied enthusiasm they ignited made the highly volatile meme stocks like GameStop and AMC Entertainment appear rational in comparison.
Following an astronomical surge in prices throughout 2021, the trajectory of NFTs took a swift downturn, mirroring the speed of their ascent. In technical terms, the market experienced a substantial correction.
This prompts the question: Can we relegate NFTs to the annals of history alongside other irrational bubbles like tulip mania and the metaverse, or is there a rational concept concealed within the wreckage?
For those unacquainted, Wikipedia defines NFTs as “unique digital identifiers recorded on a blockchain, used to certify ownership and authenticity.” They are non-replicable, non-subdivisible, and serve as indisputable proof of ownership, facilitating their sale and trade.
NFTs found their way into various domains, including art, music, and memorable sports moments, all encapsulated as NFTs and sold to the highest bidder.
For a while, these digital tokens commanded exorbitant sums. In March 2021, a bidding war drove the purchase price of Twitter founder Jack Dorsey’s inaugural tweet to a staggering $2.9 million.
Collections like the whimsical “Bored Ape Yacht Club” saw individual tokens sell for up to $429,000 each, while a basketball enthusiast spent $387,600 to claim ownership of a LeBron James slam dunk moment from the NBA Top Shot series.
Even artists demonstrated their flair for commerce, with digital artist Beeple, also known as Michael Joseph Winkelmann, famously auctioning his work “Everydays: The First 5000 Days” at Christie’s. Originally priced at $100, it fetched an astonishing $69.3 million.
Regardless of opinions on Beeple’s artistic prowess, his financial acumen is undeniable, as he promptly converted the entire sum into US dollars.
Celebrities joined the craze, with luminaries like Snoop Dogg, Paris Hilton, Lindsay Lohan, Justin Bieber, and Madonna all making their NFT forays.
The unprecedented levels of frenzy, however, appeared unsustainable, and as inflation surged and conflict in Ukraine persisted, the Bitcoin price plummeted by 75%, dragging NFTs down with it. DappRadar data reveals an 81% drop in monthly trading volume between January 2022 and July 2023.
It is uncertain how much Beeple’s “Everydays” NFT would command in today’s market, but some hints suggest a more pragmatic future.
Chris Trew, CEO of blockchain development platform Stratis, sees potential in the video game industry, envisioning a world where players retain ownership of in-game assets, which could be converted into real-world value or transferred to other games.
NFTs also hold promise in solving ticketing industry woes, combating issues like fraud and scalping, while offering event organizers and artists a share of the revenue from ticket resales.
Tom Gorgan, CEO of emerging tech consultancy MRDx, views the NFT market correction as a natural phase in its evolution, with the technology poised to find nuanced applications in gaming, industrial supply chains, ticketing, and beyond, all examined on a case-by-case basis.
The NFT bubble may have burst in spectacular fashion, but akin to the dot-com crash of the early 2000s, a correction is an intrinsic part of the process. The underlying concept of NFTs may yet shine brightly in the future, much like the enduring utility of the internet itself.
