It’s far from the only top-heavy market with a handful of star assets, a whole lot of obscure duds and newly enriched traders claiming to have divined systems for outperformance.

But in their lack of any clear economic value, NFTs stand apart from other recent speculative fads. Anyone can mint a token, which essentially denotes unique ownership of an asset on the blockchain. 

“Some of this is just the taste of the community,” said Benjamin Rameau, founder of a decentralized group investing in NFTs called Jenny DAO. “What the market decides is valuable sometimes is decided by weird factors.” 

Herding is inherent to the game. Martin Gaspar, an analyst at crypto firm Crosstower Inc., flipped a digital portrait from the collection Hashmasks for about 40% in two weeks in February by watching what’s trending on Twitter. Now he sees NFT fans following Discord and Telegram groups for similar signals. 

The advantages of being in-the-know was laid bare this week when OpenSea acknowledged an employee had used confidential information to snap up items before they appeared on the front page. 

“Everyone’s trying to get into a big thing before it becomes really popular,” Gaspar said. “If there are notable crypto influencers who are talking about an NFT project, oftentimes it’s worth listening or at least taking a look at.” 

Assessing the fair value of virtual koalas, vampires or eggs is so hard for most speculators that it’s become an arbitrage opportunity for algorithmic traders, who post lowball offers for a broad swath of works in the hopes of baiting unknowing sellers. The bots can then instantly resell the tokens at higher prices. 

Grumbles over disappearing liquidity got louder when Bitcoin crashed as much as 17% on Sept. 7. Since then, NFT prices have also slipped along with volume. Loot (for Adventurers) -- among the hottest collections at the time -- has seen its floor price, or the cost of its cheapest piece, nearly halve. Relative to the record high, it’s down 54%.

“You’ve got a new NFT drop recently that’s been happening every two hours,” said Rameau. “There’s just no way you’ll have that many collections maintain value.” 

Like the crypto world before it, NFTs have also been dogged by suspicions of wash trading, where a speculator inflates volumes by buying and selling against themselves. Nonfungible’s Zuppinger and Dan Kelly found that from May 2020 to February 2021, such fake transactions made up 28% of the dollar volume at an unnamed art marketplace, with another 10% flagged as suspicious.