While crypto slumps, the NFT market is going from strength to strength. Are we seeing the crypto-NFT decoupling?
In case you hadn’t noticed, crypto ain’t been doing so crash hot of late. Prices are down, volumes are down, scams are up and the prevailing atmosphere is that of a going away party for a soldier heading to the trenches of World War One.
Yet while crypto suffers, NFTs – those frequently mocked, glorified jpegs – are doing, well, great. Active users, trading volumes and floor prices are breaking records. In Asia, NFT is outstripping crypto in Google search volume. (China, where both crypto and Google are essentially banned, is leading the charge). OpenSea, the leading NFT marketplace, currently accounts for 1-in-5 Ethereum transactions.
And then, of course, there was that exceedingly odd exchange between Jimmy Fallon and Paris Hilton as they showed one another print-outs of their Bored Apes while the crowd went wild. Which, if I recall correctly, is one of the biblical signs of the Apocalypse?
I’ll admit it. I bought some NFTs. More specifically, I bought some NFTs with a group of friends. (We have a virtual gallery and everything). One of them was something called a CryptoDickbutt; AMA.
I’m not usually one to signpost my own trades, but I feel like this goes to the heart of the NFT phenomenon. Think of it this way: you might have friends who trade crypto, but no-one’s trading crypto together. There’s something intrinsically social about NFTs, in the way that flipping shitcoins at 3 am to take advantage of US market volatility simply isn’t. Maybe it’s the overweight penguins with the funny hats.
For all its bluster about changing the world, the culture of crypto right now is inescapably driven by money. Who’s making it and where is it going next? And nobody’s denying that the NFT markets are rife with greed, scams, stupidity and insider trading. It is crypto, after all.
But you still end up with these pieces – of admittedly varying quality (and questionable legal status) – and you look at them and you feel a strange sense of possession and pride and connection and you realise how thin the barrier between the online and offline worlds has actually become.
Watch your step
With that said, the NFT market remains shockingly immature, both literally (did I tell you about the Dickbutts?) and in terms of its actual depth and user share. The barrier to entry is large, the risks for newcomers high and the proportion of garbage, no-hoper projects excessive. And even with all the progress they’ve made, it’s still a drop in the ocean compared to the trillion dollar crypto markets.
NFTs are also exceedingly illiquid assets. As a purely person-to-person marketplace, there’s no guarantee you’ll be able to find a buyer for your asset – or at least not one that can come close to your original investment. And if the whole market starts to tank, well, let’s hope you’re in it for the art.
It’s a scam hurr-durr
I’m not here to pass judgment on the technical, legal, financial, philosophical or cultural merits of NFTs. Those arguments are playing out in real time, with a passion, intellect and vitriol uncommon even by crypto’s hyperbolic standards. Suffice it to say that some of the criticism is warranted, much less so.
However, what I will say is that much of the critique can be boiled down to “the whole thing is a scam and the people involved are dumb.” And you don’t need a long memory to recognise that’s what they said about Bitcoin.
That isn’t to say NFTs are all about to explode a la crypto in 2017. But it takes a tremendous amount of confidence in your own opinions to not even be interested in what so many creators, consumers and communities all over the world have started to see in this technology. To write off everyone involved as either a shyster or a fool.
As Packy McCormick of the Not Boring newsletter put it, “Powerful things happen when you combine money, status and community.” When it comes to NFTs, we’re only just starting to find out what those things might be.