The value of internet collectibles like cartoon monkeys and arty doodles has gone down as real-world conflict and a wider cryptocurrency slump start to unravel one of the most hyped-up frenzies of the past year.
There were a lot of animal collections like Bored Ape Yacht Club and Cool Cats and Pudgy Penguins that rose in value last year thanks to celebrity endorsements, social media buzz, and other factors. By the end of last year, almost $41bn had been spent on NFTs — making the market nearly as valuable as the global art market.
But at the same time, a lot of the market has started to depreciate, leaving new investors with big losses and raising questions about the long-term prospects for NFTs.
NonFungible, a website dedicated to tracking the NFT market, collated data tha shows the average selling price of an NFT has dropped more than 48% since a high point in November to around $2,500 over the last two weeks.
OpenSea, the biggest marketplace for NFTs, has also seen daily trading volumes drop by about 80% to about $50mn in March, just a month after they hit a record high of $248mn in February.
According to NonFungible, the number of accounts that buy and sell NFTs every week has dropped to about 194,000. The number of accounts reached a high point of 380,000 in November of this year.
By the end of last year “there was a general sense that there was saturation in certain parts of the market, particularly in primate-themed profile pictures”, according to Nadya Ivanova, CEO of L’Atelier, a trend-forecasting unit of the French bank BNP Paribas.
A 19-year-old investor in a Telegram group where more than 1,000 people talk about NFTs said, “I think many people will be scarred and burned by this market and may never touch NFTs again.” They made fun of the fact that this month they would be living off rice, porridge, and grass.
People like Gwyneth Paltrow and Snoop Dogg own NFTs called “Bored Apes”. The average price of these has dropped 44% since there the start of the war in Ukraine, according to a Financial Times analysis of OpenSea.
Several animal collections rose in price thanks to celebrities and social media hype. NFT index: Bitwise’s “blue chip” index has lost 25% in the last month. It’s down 17.1% for the year. In this week, more than 60% of the index was made up of collections like Bored Apes and CryptoPunks.
New Financial Tokens are unique ownership rights in a wide range of online valuables, such as works of art, digital trading cards and gaming items that are stored on the blockchain, a digital ledger that underpins cryptocurrencies like ethereum. NFTs can be used to buy and sell these valuables. Rise in popularity of NFTs that show so-called “PFPs,” or profile pictures, pushed the market to a standstill last year.
A big drop in the price of the dominant cryptocurrency used to buy NFTs, Ether, has also happened. It has dropped more than 40% since it hit an all-time high in November. Decentralized finance projects and other projects linked to ethereum have also lost value.
Despite the recent sell-off, some analysts think it’s too soon to call a ceiling in the market, which has seen a flood of venture capital and led to a number of billion-dollar businesses, such as OpenSea and the NFT developers Dapper Labs and Sorare.
Sotheby’s last month, more than 100 Cryptopunks with a value of almost $30 million were pulled from the auction. “The number of buyers still outnumbers the number of sellers,” said Ivanova, a BNP Paribas banker. At this point, “the bubble won’t break.”
There are still a lot of big collectors who say they have no plans to slow down their purchases. They see NFTs as important technology for a new web, one that is run by cryptocurrencies.
NFT adviser Fanny Lakoubay says: “There’s been a lot of noise and scams in the NFT space. This crypto winter gives the sector time to build technology that works and teach people about it,” Lakoubay said. “This industry is still very much in the making.”
“Blue-chip” NFTs, on the other hand, were seen as more stable and had more value than just trading, some collectors said.
Even though the price of ‘common’ Axies has dropped from $300 to $25, the value of ‘rare’ Origin and ‘mystic’ digital monsters in the popular video game Axie Infinity “hasn’t changed” even though the price of common Axies has dropped from $300 to $25 according to Aleksander Larsen, chief operating officer of the game’s developer Sky Mavis.
New members have joined Flamingo DAO, which has more than 4,000 NFTs. The Chernin Group, a private equity firm in Los Angeles, is one of them. The two-year-old group is worth about $1bn now.
As other parts of the market have lost money, Flamingo’s portfolio “hasn’t moved that much in value,” says Aaron Wright, a member of the DAO. In place of slowing down their purchases, the group has been going faster, he said.
Somewhere else in the high-end NFT market, there have been cracks. Last month, the owner of more than 100 CryptoPunks worth between $20 million and $30 million suddenly decided to pull the lot from an auction at Sotheby’s, even though the auction was set to start. In cryptocurrency slang, “hodl” means to keep an investment for the long run. The owner said he decided to do this.
“Is this a pause before things pick up again in a month or two?” Bored Capital Club founder and Bored Apes investor Mark Chrystal thinks so. “I think so, too,” he told the New York Times. We may not be seeing the end of the NFT market, but we may be at the end of the beginning.