The Great NFT Sale: Has the digital collectibles craze peaked?

Internet collectibles ranging from cartoon monkeys to artistic doodles have plunged in value as real-world conflict and a broader cryptocurrency crash begin to unfold in one of the biggest speculative frenzies in the world. ‘last year.

Digital items known as non-fungible tokens burst into mainstream culture last year as several animal collections, including Bored Ape Yacht Club, Cool Cats and Pudgy Penguins, rose in price, helped by celebrity endorsements and social media hype. By the end of 2021, nearly $41 billion had been spent on NFT, making the market almost as valuable as the global art market.

But almost as quickly, large parts of the market began to deteriorate, leaving novice investors with big losses and raising questions about the long-term prospects of NFTs.

The average sale price of an NFT has fallen more than 48% since a November peak at around $2,500 in the past two weeks, according to data from the NonFungible website.

Daily trading volumes on OpenSea, the biggest market for NFTs, fell 80% to around $50 million in March, just a month after hitting a record high of $248 million in February.

Meanwhile, the number of accounts buying and selling NFTs on a weekly basis fell to around 194,000, according to NonFungible. The number of accounts peaked at 380,000 last November.

At the end of last year, “there was a general feeling that there was saturation in certain parts of the market, particularly in primate-themed profile photos,” said Nadya Ivanova, director of the operating at L’Atelier, a trend forecasting unit of French Bank BNP Paribas.

“I think many will be scarred and burned by this market and may never touch NFTs again,” a 19-year-old investor said in a Telegram messaging group where more than 1,000 people discuss NFTs. Other members joked that they will live on rice, porridge and grass this month.

According to a Financial Times analysis of OpenSea, the average price of a Bored Ape NFT, a collection that counts celebrities such as Gwyneth Paltrow and Snoop Dogg as owners, has fallen 44% since the war began in Ukraine as investors withdraw from trading. colorful cartoons.

Billboards in New York's Times Square advertise Cool Cats
Billboards in New York’s Times Square advertise Cool Cats, one of many animal collections that have skyrocketed in price, helped by celebrity endorsements and social media hype © Noam Galai/Getty

A “blue-chip” NFT index offered by Bitwise has fallen 25% over the past month, leaving it down 17.1% for the year. Bored Apes and CryptoPunks, two of the most popular and beloved collections, accounted for over 60% of the index this week.

NFTs represent unique property rights in a vast universe of online valuables, including works of art, digital trading cards and gaming items hosted on the blockchain, digital ledgers that underpin cryptocurrencies such as Ethereum. The growing popularity of NFTs showing so-called PFPs, or profile pictures, sent the market into overdrive last year.

The market pullback reflected a broader sell-off in Ether, the dominant cryptocurrency used to buy NFTs, which fell more than 40% from its all-time high in November. Many projects in decentralized finance and other Ethereum-related areas also fell in value.

Despite the recent selloff, some analysts say it’s too early to call a top in the market, which has attracted a flood of venture capital and spawned several billion-dollar companies, including OpenSea and developers NFT. Dapper Labs and Sorare. .

CryptoPunk tokens on display in New York last year
CryptoPunks tokens on display in New York. Last month, the owner of more than 100 tokens worth an estimated $30 million removed them from an auction at Sotheby’s © Alexi Rosenfeld/Getty

“The number of buyers is always greater than the number of sellers,” said Ivanova of BNP Paribas. “We are not about to burst a bubble.”

Several major collectors said they don’t plan to slow down their purchases and see NFTs as an important technology for a new view of the web, curated by cryptocurrencies.

“There has been so much noise and scams in the NFT space, this crypto winter gives the industry time to build technology that works and educate,” said Fanny Lakoubay, Crypto Art Advisor. currency and NFT. “This industry is still very much under construction.”

Some collectors said the market seemed to be split between relatively stable “blue chip” NFTs and more mainstream or speculative projects with little value beyond trade.

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A Discord user, who goes by the name Lurmley, said he bought a Cool Cat last weekend as the average price on OpenSea fell from 17 ether at the end of January to less than 8 ether – worth $2,591 today – believing that the collection would be one of the few to survive the current crisis.

The Value of Origin and Mystic Rare Digital Monsters in the Popular Video Game Axie Infinity has “stayed stable” even though the entry price for common Axies has dropped from $300 to $25, said Aleksander Larsen, COO of game developer Sky Mavis.

Flamingo DAO, a collective of cryptocurrency enthusiasts that owns more than 4,000 NFTs, recently recruited major investors as new members, including Los Angeles-based private equity firm The Chernin Group, valuing the organization two years to about $1 billion.

While the sale affected other parts of the market, Flamingo’s portfolio “hasn’t moved much in terms of value,” said Aaron Wright, a fellow who helped form the DAO. Instead of slowing purchases, the group accelerated, he said.

Cracks have started to appear elsewhere in the high-end NFT market. Last month, the owner of over 100 CryptoPunks with an estimated value of $20-30 million suddenly decided to pull the lot from an auction at Sotheby’s. The owner said he decided to “hodl,” cryptocurrency slang, to hold on to a long-term investment.

“Is it a break before a resurgence in a month or two? I suspect so,” said Mark Chrystal, founder of Bored Capital Club, a collective that invests in Bored Apes. “I don’t think we are seeing the end of the NFT market, but we may be seeing the end of the beginning.”

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