Bitcoin’s bouncing around $50,000. DeFi is seeking to go mainstream. But all anyone in the digital-asset world wants to talk about are NFTs.
Non-fungible tokens, which allow holders of art and collectibles to track ownership, are staging a resurgence after fading from the headlines during Bitcoin’s springtime swoon. Whether it’s crypto entrepreneur Justin Sun paying $500,000 for a picture of a rock, or cartoonish depictions of penguins and apes, NFTs—born of the blockchain technology that powers cryptocurrencies—are again at the center of the speculative buzz that drives digital markets.
Les Borsai recently spent $1,300 on a Pudgy Penguin for his niece’s birthday. “I sent her this penguin and a few days later, that penguin was worth $7,000,” said Borsai, co-founder of Los Angeles-based blockchain-crypto asset manager Wave Financial Group. “And the first thing I thought to myself was, why did I send her that penguin?”
The renewed frenzy in interest helped push NFT daily sales to an all-time high on Aug 6. It’s not just the cartoons of penguins, ducks, apes and robots augmenting the digital art sold earlier this year through Christie’s. NFTs are now being embedded into everything from Twitter profile pictures to games to the latest decentralized-finance apps, which let people borrow, lend and trade coins and which had been the speculators’ choice du jour until NFTs came along.
Like the rest of the crypto world, the reappearance of NFTs has brought out doubters too. Art and collectibles—and NFTs share traits of both—are notoriously fickle value propositions. Combine them with something as volatile as crypto assets, and there is reason to proceed cautiously. The tokens themselves are often rudimentary—little more than profile pictures—while others let users unlock new services.
And success hasn’t been easy to come by. For all the hoopla around Beeple’s $69 million windfall in March, plenty of NFTs end up languishing or selling for a few dollars apiece.
“What is happening right now is the equivalent of me hearing that a major contemporary painter has sold something for millions of dollars and I, someone with no art skill or experience says, ‘Well I guess I better start painting because any paint on canvas is selling for millions,’” said Stephane Ouellette, chief executive and co-founder of FRNT Financial.
And some long-time crypto advocates are warning the heightened interest can’t sustain itself for much longer. The sector, they argue, looks to be the latest crypto bubble.
“These were people too slow to capitalize the first time around,” said Aaron Brown, a crypto investor who writes for Bloomberg Opinion. “Since all of them seem driven by cynical calculation for money rather than any vision of NFTs, I suspect things will soon collapse.”
That hasn’t slowed the momentum yet. OpenSea, the world’s biggest NFT marketplace, expects to see $1 billion in transaction volume this month, up from $300 million in July and $8 million in January, said Devin Finzer, co-founder of the platform.
“We are seeing a giant growth curve,” said Finzer, who expects up to 6 million people to browse the site this month, compared with 400,000 in January. He estimates that hundreds of thousands are buying and selling NFTs through the site monthly, up from tens of thousands in the beginning of the year.