Study Finds 95% of NFTs are Now Worthless
Of all the investment crazes in recent years, non-fungible tokens (NFTs) may take the cake for the quickest rise and fall in value. A September report by dappGamble explored the value of over 73,000 NFT collections. Among those, 69,795 of them have a market cap of 0. Essentially, 95% of people holding NFT collections are the owners of worthless investments. That’s not a handful of investors – more like 23 million people.
If you’re new to NFTs, here’s the lowdown: They are unique digital assets that represent ownership of a specific item or piece of content, such as art, music, or videos, using blockchain technology. Unlike cryptocurrencies like Bitcoin or Ethereum, which are fungible and can be exchanged on a one-to-one basis, each NFT has a distinct digital signature, making it one of a kind.
What’s the appeal for NFT Investors?
- Uniqueness and Scarcity: Each NFT is unique or part of a limited run, creating scarcity which can increase value. As in the traditional art world, some artists’ work is highly prized. NFT investor thinks… “It’s hot”
- Proof of Ownership: Blockchain technology provides a secure and transparent record of ownership. It offers a certifiable uniqueness of the art piece that cannot be duplicated by others. NFT investor thinks… “It’s mine”
- Resale Potential: NFTs can be sold in digital marketplaces, often at a higher value if demand increases. NFT investor thinks… “It’s worth a lot”
- Creative Expression and Support: Purchasing NFTs is a way to support artists and creators directly. NFT investor thinks… “I’m an arts aficionado”
So how crazy did it get?
Well, the artist Beeple’s “Everydays: The First 5000 Days” sold for a record-breaking $69 million at Christie’s, one of the most famous NFT sales to date. CryptoPunk #7804, One of the 10,000 unique collectible characters with proof of ownership stored on the Ethereum blockchain, sold for $7.6 million. And Canada’s own Justin Bieber made headlines when he purchased the “Bored Ape” NFT in 2022 for roughly $1.3 million. Today it’s estimated to be worth $60,000.
For most outside observers, likely the most baffling aspect of NFT investing is the artwork itself, which often features a pixellated mash-up of unlikely symbols. Art to some, certainly, but for those who consider a Renoit a masterpiece it likely won’t suit traditional tastes. If you’re curious to take a look, Canadians can review and purchase NFTs on platforms like OpenSea and Rarible.
Where is the NFT Market Heading?
The heady days of multi-million dollar bidding wars for trendy NFTs are likely over, for some years at least. The report from dappGambl also found that 79% of all NFT collections, almost 4 out of every 5, have remained unsold. This, while artists continue to churn out new offerings every day. It’s a buyer’s market, with an expanding inventory that has no measurable cap or limits.
It will also be interesting to watch how the value of authentic, one-of-a-kind NFTs hold up as AI image generation continues to progress rapidly. While AI image generators are prohibited from reproducing copyrighted works, the technology buts a powerful palette of creation tools in the hands of everyone. Will ubiquitous visual creativity increase the value of an authentic ownership stamp, or will floodgates open as visually powerful art creation tools become widespread?
One truth you can count on: NFT investing and the value of NFTs will be a fascinating asset class to keep an eye on. Looking for a more stable way to get started? Explore our RRSP guide for tips on using tax-deferred investing to grow your wealth faster.