NFTs are dead: Zurich’s government council decides: young people should no longer sleep

2021 saw the start of a new crypto hype: NFTs. Speculators and collectors spent millions on digital goods – mostly artists’ photographs. For example, Deepak Thapliyal, the CEO of a Chinese tech company, paid a whopping $23.7 million for “CryptoPunk #5822” in February 2022. An image of a pixelated blue cartoon man. It is one of a total of 10,000 so-called ‘avatars’ that a Canadian technology company released in 2017. They were intended as a profile picture and were originally free.

By purchasing the NFT, Thapliyal became the legal owner of the image. Even in 2021, many people didn’t understand why you should buy an NFT – and what use this digital asset actually has. After all, copies of NFTs can continue to circulate freely on the internet.

Nevertheless, crypto nerds promised a revolution in the traditional art market with NFTs. And speculators promised themselves a lot of money. Finally, celebrities like Justin Bieber, Paris Hilton, and Jimmy Fallon have further fueled the hype surrounding NFTs in 2022. They signed lucrative advertising contracts with NFT sellers and invested money in the tokens themselves. Artists, companies and brands like Gucci quickly flooded the market with NFTs.

Five dollars for former ‘top NFT collections’

Today, a year and a half later, the wind has changed. The American magazine Rolling Stone headlined: “Your NFTs are basically – finally – totally worthless”. This comes after DappGambl, a community of blockchain technology experts, published a study in September analyzing more than 73,000 NFT collections worldwide. The authors of the study concluded: 95 percent of the world’s NFT collections are now worthless. You can’t ask for a cent more for it.

Even NFTs, which are considered a “top collection” according to cryptocurrency analytics platform “CoinMarketCap,” have lost a lot of value. For example “Deadfellaz #4255” from the Deadfellaz collection. In January 2022, someone paid around $11,500 for the NFT with a green avatar. Today the NFT is on sale for $240.

DappGambl calculated that 18 percent of the former top collections now even have a base price of $0. Most of these – 41 percent – ​​can only be sold for between five and one hundred dollars. Today, you can still charge more than $6,000 for less than one percent of NFTs from top collections. “This underlines the rarity of high-quality assets, even among the best of the best,” the study authors write.

What “DappGambl” also discovered with their analysis: 79 percent of all NFT owners can no longer resell their collections at all. So from a market perspective, your NFTs are dead. ‘DappGambl’ assumes that almost 23 million people are stuck with their NFTs.

The NFT speculation bubble has burst.

“I always predicted that!” some people might be thinking now, perhaps a little maliciously at the idea that billionaires have thrown money out the window for crappy photos.

But the sad thing is: It wasn’t just billionaires, but also average earners who, blinded by the promises of NFT sellers, lost a lot of money. This is what Feyyaz Alingan says. He is the founder of Blue Alpine Research, a startup that evaluates new technologies such as crypto, blockchain and NFTs and creates educational content. For example, he gives a lecture about NFTs at the ZHAW.

It all started with a “Digital Flex”

“NFTs have gone through the classic Gartner hype cycle,” says Feyyaz Alingan. In science, this describes a phenomenon in which a new technology or trend creates a wave of interest, leading to a rapid price increase. But once the hype wears off, prices drop just as quickly.

“The NFT hype started in 2021 with a few people changing their profile picture on social media to something like a crypto punk,” says Alingan. They wanted to show that they knew their way around the crypto world. So good that they bought NFTs when almost no one else had heard of this technology. The profile photo as an identification sign that you are part of an insider group. A status symbol.

Alingan calls it a “digital flex”. They wanted to show themselves. Especially in 2021, when people were at home in front of their screens due to the pandemic and could no longer show off a Rolex on the way out. “NFTs quickly became a trend and eventually a hype.” And the hype was followed by what the ‘Gartner hype cycle’ predicts: ‘The bubble has burst. Prices plummeted,” says Alingan.

Feyyaz Alingan also bought NFTs. Fortunately, as he says, at an early stage. He didn’t have to invest much money. Nevertheless, NFTs have also lost value. But he doesn’t want to say more about it.

Speculators have never understood what NFTs are

Alingan explains that a speculative bubble was actually created because there were many people involved in the NFT market who actually had no idea about the technology. The NFTs were conceived as a new cryptocurrency. And that’s what they speculated about. “The idea behind NFTs was to never make a profit by owning them.”

For the first time, NFTs allow artists to directly benefit financially when their works are resold. “As an artist, I can incorporate a so-called ‘smart contract’ into my NFTs, whereby, for example, I receive 5 percent of the sales price upon resale. “It was revolutionary for the art market,” says Alingan.

In the early days of the hype, an NFT was more than just proof of ownership. For example, artists sent regular mail to the owners of their NFT artworks. Or companies sent merchandise clothing that was not available on the open market. But at some point it would have stopped.

So they tried to get rid of them. But no one was interested in buying anymore.

After all, only a few people who sold at the right time would have truly benefited. And when was this ‘right time’? “Around April 2022. That’s when the NFT hype reached its peak,” says Alingan.

Only a Few NFTs Will “Survive”

So are NFTs really dead today? “A lot of NFTs do that, yes. They will probably never be able to be resold,” says Alingan. At the same time, there are NFTs that can hold their own. For example, the Cryptopunks in question. However, such examples are the absolute exception nowadays. The remaining 5 percent.

The authors of the “DappGambl” study predict: “To survive market downturns and have lasting value, NFTs must be historically relevant (similar to first edition Pokémon cards), be real art, or provide real utility.”

Feyyaz Alingan does not contradict this statement. But he states: “Certainly in art, an NFT that is worthless on the market can still be valuable to the individual.” For example, he bought NFTs that he really liked. What he enjoys when he looks at it. And by buying them he wanted to support artists whose art he liked.

That’s also his advice: only buy NFTs that you really like. And:

Exploring a possible future of NFTs

NFTs are still not off the table for Alingan. On the contrary. On the one hand, the NFT art market has now been normalized. On the other hand, the further development of the technology is only now gaining momentum. Because with NFTs it is possible for the first time to digitally prove who owns a token. “This is also revolutionary and has a lot of potential for other industries.”

Alingan cites the real estate sector as an example. In the distant future, land registry registrations could, for example, be made using NFTs. Anyone who buys a piece of land or a building comes into possession of an associated NFT.

So maybe one day we’ll all own an NFT, just like we all have smartphones these days. But maybe not. “Making predictions in the crypto world remains difficult,” says Feyyaz Alingan.