In 2021, the art world has seen a tremendous rise in the popularity of nonfungible tokens, or NFTs. For those who still have yet to hear of the newest trend, NFTs are electronically verified pieces of work, whether it be music, artwork, and in some cases tweets. An NFT basically provides a permanent digital autograph and also goes on to change the way artists profit off of their work. February and March saw significant increases in prices paid for NFT works, such as Beeple’s Everydays: The First 5,000 Days, which sold for $69.3 million, and Sophia the Robot’s Sophia’s Instantiation, which sold for $688,888. Even celebrities are cashing in on the fad – Grimes sold a collection of digital artworks for nearly $7 million in under 20 minutes, Shawn Mendes’ NFTs sold at a couple thousand dollars apiece, and Halsey’s highest-selling NFT sold for $7,000. However, like many things in an age where the climate is constantly changing, NFT prices have seen a significant drop in recent weeks. Was the craze that short-lived? Or is there still hope?
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Back in February, the average price of NFTs was over $4,000. In recent weeks, the average price has been about $1,500, resulting in a near 70% drop in prices in April compared to the highs in February. In early April, sales in the NFT market dipped from $16.7 million to $12.5 million over the course of a mere five days. So why could this be happening just as NFT sales started to pick up?
While there’s no definite one answer, The Art Newspaper says there have been reports of scams, issues with compatibility across marketplaces, and question marks over ownership and authentication. Most recently, an NFT of a drawing by Jean-Michel Basquiat was a victim of such issues. The work, Free Comb with Pagoda, was being auctioned at OpenSea and was set to give the winning bidder the option to destroy the original physical artwork. However, it was withdrawn from the sale as the estate of the artist owns the copyright, stating that no license or rights were given to the seller.
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Despite the decline in prices, experts say that it is not a bad sign for the NFT market. Although the prices have plummeted, Nonfungible.com reports that the price of NFTs now is still 10 times higher than it was six months ago. “Obviously, nothing today suggests what the future of the NFT markets will be. Given the recent hype surrounding this asset class, it is possible that some drastic changes will occur in the markets in the coming weeks,” an April 6 blog post on the website says. Artists such as Beeple, who is now considered the third most valuable artist alive following his gargantuan NFT sale, are comparing the boom to the dawn of the internet and the bubble that followed, otherwise known as the dot.com bubble.
The dot.com bubble, or the internet bubble, was when the internet first began to take off, with the high lasting from about 1995 to 2000. A massive amount of growth and adoption of the internet during those five years resulted in the Nasdaq Composite stock market index rising 400 percent, only to fall 78 percent from its peak in October 2002, giving up all its gains during the bubble. When the crash happened, many online shopping sites shut down, while others, including Amazon, suffered from losing a large portion of their market capitalization, yet still managed to survive.
While the sudden rise in NFT value and recent pullback may remind some of past market bubbles, Melissa Gilmour, founder of the London-based NFT agency Lily & Piper, thinks this drop is only temporary.
“A drop in value was inevitable,” Gilmour told CNN. “There has been an over-saturation of platforms and it’s getting hard to differentiate and navigate.”
Gilmour goes on to say, “Some art is holding its own and I don’t think it’s a permanent drop. There are elements of a hype cycle in this one, but we still see it as an immense long-term opportunity.” To affirm this, data dating back to May 2020 retrieved from Nonfungible.com suggests that the average values of NFTs have a pattern of showing strong fluctuations.
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Overall, it’s safe to say that while there may be a decline in NFT values in comparison with its sudden highs earlier this year, the market is not going anywhere anytime soon. As Nonfungible.com puts it, NFTs still have a bright future ahead of them.
