Where’s Paris Hilton when you need her? After spurring investments in non-fungible tokens on nightly US chat shows, the reality star has gone silent. NFTs, the most speculative of all speculative assets, are crashing. The value of an index developed by cryptocurrency researchers is down 78 percent from its peak last October. That’s a steeper decline than tech stocks and Bitcoin.
This is uncomfortable for celebrity traders and the companies that have been talking about NFT projects for months. Many are only now revealing these plans. Earlier this month, Instagram announced it would allow collectors to share their NFTs on its platform. A week later, Spotify said it was running a trial that would allow artists to promote their NFTs. A few days later, trading platform Robinhood revealed plans to allow users to hold NFTs in a standalone wallet. Meanwhile, sales faltered.
The speed of market reversal is breathtaking. Earlier this year, I felt like most of the meetings I’ve had with US tech companies were somehow related to cryptocurrencies and NFTs. A shift into the mainstream happened at lightning speed. Martha Stewart had pictures of her farm listed as NFTs. Dolly Parton sold NFTs of her new album. The Miami startup behind Bored Ape Yacht Club – probably the best-known NFT collection – has been valued at $4 billion. NFT sales, which hit nearly $41 billion last year, were seen as a starting point for even bigger gains in 2022.
Now? Be silent. Was that just a bubble at the end of the tech rally? Was it a scam all along? Or could institutional interests be proof that the digital Wild West lives on?
There is a lot of noise on both sides. Crypto’s true believers don’t seem to be able to accept the reality. But critics can be just as unreasonable. There will always be cheering when something collapses that most people were not involved in – but which made some very wealthy.
Cynics will say that tech company interest in NFTs has been opportunistic and embarrassingly slow. Projects can be quietly shelved if the market doesn’t recover in the next few months.
But companies that cling to new ideas always tend to move slowly. In a large organization, logging out takes time – a problem in volatile digital markets. Facebook asked former PayPal President David Marcus to develop its digital currency plans during the crypto boom of 2018. He left the company in December 2021 in the midst of a full-blown crypto crash. Recently, financial services giant Fidelity announced that it would help clients invest in crypto for retirement savings just as prices were in freefall.
But it’s also possible that companies will help NFTs transition from expensive cartoon monkey JPEGs and other digital collectibles to something more sustainable. The analogy I’ve heard twice in the past month is Pets.com, the notorious online pet supply company that collapsed in the dot-com crash. The company failed, but e-commerce lives on.
Could something similar happen with NFTs? Maybe, but not necessarily in the current form.
Despite billions in investments and celebrities, there is still a lack of clarity about NFTs. Why pay for digital artwork or video clips that anyone can view online? The answer is that NFTs make it easier to own the official version. It is unique – non-fungible – digital data. Scarcity value should translate into price. But only if other buyers agree. Many have evaporated in the downturn. Phishing scams are common.
At the moment there isn’t much to do with NFTs other than showing them as a profile picture. As such, NFTs with some sort of real-world benefit (or connection to a well-known artist) are popular. For example, director Kevin Smith’s new film will only be available to viewers who purchase a KillRoy NFT.
The dream is that NFTs will prove that cryptocurrencies and blockchain technology are useful – something that has always been a sore point for crypto advocates. NFTs are truly digital contracts, a way to verify ownership of something through permanent records without the need for a middleman. They could theoretically be used for anything.
Believers see the current sell-off as temporary. You’ve experienced recovery before. Andreessen Horowitz, a Silicon Valley venture capital firm known for its commitment to digital assets, has dubbed the downturn a “price-innovation” cycle. Last week it announced that it was investing in Tally Labs, a media company that intends to turn one of the Bored Apes into intellectual property for books, films, and other formats. Think Harry Potter but a cartoon monkey dressed up as a valet. He already has a Hollywood agent. Bestselling author Neil Strauss is writing his memoirs. NFTs don’t need celebrities when they become one themselves.
Source: Crypto News Austria