The NFT market hasn’t crashed — it was never not crashed

I wrote a story this week on the NFT market for Artnet News. You can read it here. As always, there’s more to say on the subject!

After Paul Vigna at the WSJ announced that the NFT market is “collapsing,” dozens of other media outlets have been rushing to write their own stories on how the NFT market is crashing. 

Fortune’s headline read: “The NFT bubble is showing clear signs of bursting.” Decrypt wrote: “Bored Ape Yacht Club, Other Ethereum NFT Prices Plummet as Crypto Market Crashes.” And the LA Times reported that NFTs are crashing along with SPACs, meme stocks, and other risky investments.

Vigna pulled his data from Nonfungible.com. Gauthier Zuppinger, the COO of Nonfungible.com, told me the data Vigna looked at was incomplete, “insofar as it came from the front end of our site, which was in the process of synchronizing data from Axie Infinity.” A popular P2E game, Axie-Infinity represents a large volume of active NFT wallets and transactions. To be fair, Zuppinger sent me this to show me the market isn’t quite as terrible as the WSJ reported.

However, if you look at what’s on Nonfungible’s site, which is clearly what Vigna was looking at, things look bleak. Aside from an uptick in NFT sales on April 30 when Bored Ape Yacht Club held its Otherside land sale, things have been slipping downhill since the beginning of the year.

Admittedly, the data on the NFT market is confusing. Some of the reports on Dune Analytics and DappRadar make it look like the market still has a fighting chance. Blockchain analytics firm Chainalysis published a report on May 5 on how NFT transaction activity has been “stabilizing.” 

NFTs are illiquid assets. It’s not easy to find a new sucker everyday willing to pay millions of dollars for a JPEG — not even a JPEG, but a token on a blockchain that points to a JPEG.

This is why we see situations like the one on Feb. 8, when a seller going by @0x650d on Twitter decided to “hodl” his collection of 104 CryptoPunks at the last minute. The collection was supposed to fetch $30 million at Sotheby’s — but there were no buyers.  

If you accept that the NFT market is crashing, you have to accept that the NFT market ever existed at all. 

The problem with NFT data is that most of it is coming from the NFT platforms themselves. There’s no way to confirm if what they are reporting is real. And there is good reason to suspect the secondary market doesn’t exist at all — it’s just wash trading, meaning the same money is going back and forth between the same people, to pump up the prices. 

Most of the activity on LooksRare, a marketplace that launched in January and went on to challenge power player OpenSea, turned out to be fake. In February, Chainalysis reported “significant” wash trading on NFT platforms. Their findings made international news. On May 4, the first day that Coinbase opened its NFT marketplace to the public, the platform had barely any users. This was after Coinbase boasted that 4 million were on the waitlist.

If you accept the NFT market is real, you have to be willing to accept that there are people on the planet who are willing to plunk down $350,000 for a Bored Ape NFT so they can go to a Yacht Club party in New York and a warehouse party in Brooklyn. 

You have to accept that Jimmy Fallon, Paris Hilton, Madonna, and dozens of other celebs believe that monkey JPEGs are a good investment — and they weren’t gifted these pricey tokens by friends in the entertainment industry, who also happen to be heavily invested in NFT projects. 

If you are still not convinced the NFT markets are fake, let me step you back to March 11, 2021, when all this nonsense first began, when an otherwise unknown artist named Beeple sold an NFT linked to a collage of his scrapbook at Christie’s for $69 million. It turned out that Metakovan, aka Vignesh Sundaresan, the person behind the purchase, had been pumping Beeple NFTs for months. 

Not only that, but the sale itself was a wash trade. Metakovan fractionalized a collection of previously purchased Beeple NFTs with a fungible B20 token and used the Christie’s auction to pump up the price of B20 and make millions.

“From the day the Christie’s auction began, on Feb. 25, to the close of the auction on March 11, the price of one B.20 token grew from $8.28 to $18.57,” the Washington Post wrote at the time. “The value of Metakovan’s stake in B.20 ― about 5 million tokens, according to his blog post — grew by about $51 million over that period.”

Monty Python’s John Cleese recognized the market was a joke early on. After Beeple’s “Everydays” sold, Cleese tried to sell an NFT of a scribbled drawing of the Brooklyn Bridge for $69.3 million. “I have a bridge to sell you,” he said. And yes, someone did buy that bridge — someone on OpenSea going by the pseudonym “JeffBezosForeskin” bought it for 17 ETH. He still owns it, likely because if he tried to sell it, he would get nothing. 

Crypto is crashing. Bitcoin — which is now fighting to stay above $30,000 — is down 60% since its November record. If crypto is crashing, NFTs should not be “stabilizing.” They should be writhing on the ground, gasping their last breath. 

But that won’t happen because the paramedics will soon arrive in the form of large backers. VCs, like A16z, who heavily invested in the NFT market wanted you to believe that NFTs were going to safeguard artists’ work. They told us we’d all use our NFTs in the metaverse. Reddit co-founder Alexis Ohanian, a member of the APE DAO Foundation, said a year ago: “the rise of NFTs and trading card boom is going to be HUGE for women’s sports.” His wife, tennis star Serena Williams, is one of the many celebs who mysteriously acquired a Bored Ape NFT. 

These investors will keep pumping these assets, they will keep tweeting about how stellar NFTs are, and they will fight to keep this market breathing, even if it means throwing good money after bad. 

NFTs will seemingly rise from the ashes, probably in the form of MMO games, more virtual land sales, or stories about groups of unfortunate people benefitting from NFTs. And then, predictably, NFTs will die again and ultimately return to their real value, which is nothing. 

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