Two years ago, NFTs were a multi-billion dollar industry. Pieces of digital art were selling for millions of dollars. By 2024, 95% of NFTs will hold absolutely zero value. The speculative bubble eventually burst, causing huge losses for those who took the bait. In the end, the ones who profited the most were those who got out early, and the exchanges, which sometimes charge outrageous fees as transaction fees after the sale.
Why are NFTs so popular? NFTs (Non-Fungible Tokens) first appeared in 2014, but did not attract the world's attention until the beginning of 2021. One of the digital artworks, called "Everydays: The First 5000 Days", created by Beeple, was sold for $69 million. The work, which consists of 5,000 pieces created by Beeple every day for more than 13 years, became the most expensive NFT sold at the time, triggering a huge interest in this way of distributing art. In just one year, NFT trading volume increased from $1.7 billion in 2021 to $82 million in 2022. Celebrity promotion is also one of the reasons why this new trend has swept the Internet, with big stars like Eminem or Justin Bieber showing off their NFTs on Twitter. However, some accusations claim that celebrities buy NFTs for paid marketing promotions aimed at driving up the price of listed products.
Do NFTs ever have real value? The value of NFTs, like any other cryptocurrency project, is purely speculative. While many artists and investors have made millions of dollars from crypto digital art, there are some problems with the NFT market. First, buying an NFT is not actually buying the artwork itself, but rather a link to a server where the artwork is stored. This means that the image itself is not encoded on the blockchain and the token may be exposed to link rot. Link rot is when, over time, a hyperlink may no longer point to the original target file because the resource is relocated to a new address or deleted entirely. As a result, an NFT owner's expensive pixelated avatar may disappear at any time. The second problem is seller fees. There are minting fees to buy an NFT, and seller fees are also paid when selling an NFT. In addition, there are additional fees for exchanging cryptocurrencies. There have been reports that some people actually lost money after selling NFTs for less than $100 because the fees totaled more than 100.5% of the selling price. Studies have shown that more than 50% of NFTs sold at the peak of the hype were sold for $200 or less. Therefore, the real beneficiaries are not NFT artists or buyers, but the middlemen who execute the transactions. These issues highlight some of the risks and uncertainties in the NFT market. As the market develops and matures, people need to more carefully evaluate and understand the potential risks of NFTs and the possible consequences of investing and participating.
NFT Sales 2021-2024 Ownership of an NFT does not inherently mean that the document has legal and enforceable intellectual property rights. Purchasing an NFT does not make you the copyright owner of the asset, nor does it prohibit the original creator from making more copies. Therefore, NFTs are nothing more than a status symbol. Seeing all this, it is clear why NFTs are a speculative bubble that is destined to burst. Why did the NFT market crash? After the initial hype that started in 2021, the market became oversaturated. Everyone started minting NFTs, while the demand for NFTs was decreasing every day. So oversaturation, lack of durability, and lack of real-world use are one of the main reasons for the collapse of the NFT market. As of 2023, 79% of all NFT series remain unsold.
But this is only one of the reasons behind the accident. NFTs rely on cryptocurrencies, which were also facing major difficulties at the time. The bankruptcy of FTX, the third largest cryptocurrency trading platform, triggered panic, and cryptocurrency prices fell sharply, affecting the liquidity of the NFT market. The latest report shows that by 2024, 95% of NFTs will be worth almost zero. Even after filtering out the least important collections, the statistics are not very optimistic. Among the top collections, 18% are valued at $0, while 41% are valued between $5 and $100. Only 1% of NFTs are still worth more than $6,000. At present, the situation in the NFT market is not ideal, but given the unpredictability of the crypto market, they may still recover in the future.
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Note: All content represents the author's personal views only, is not investment advice, and should not be construed in any way as tax, accounting, legal, business, financial or regulatory advice. Before making any investment decision, you should seek independent legal and financial advice, including advice on tax consequences.
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