How an NFT worth millions went from worthless – Marketplace

NFT. Did we know what they were? No. Did it stop us from buying them? No, to be honest, I’m not sure how well our economy and financial markets would function if people only bought things they understood.

But NFTs stand out because of the wild journey they have taken over the past few years. Non-fungible tokens – little works of art that can be bought on the blockchain, tiny pieces of asset that you can hold in cyberspace – have gained fame and made many fortunes over the past few years.

But this year, NFT prices fell drastically. Almost all NFTs on the market today are reportedly worthless.

This marks quite a downturn for NFTs, which saw massive growth at the beginning of 2021. It’s estimated that 23 million people bought NFTs – and it wasn’t just about sales. NFTs were a cultural phenomenon: They appeared in Super Bowl commercials, White House speeches, and Saturday Night Live skits. An NFT of a pair of Nike sneakers sold for over $130,000 – much more than the actual sneakers. NFT artists were suddenly creating NFT inspired goods for Walmart, Hello Kitty, and even Louis Vuitton.

“I definitely had FOMO,” said Claudia Hess, an art appraiser in San Francisco. She jumped into the NFT market a few years ago when some of the artists she knew started creating them and sales of NFT art started making headlines. But jumping into it was not so easy.

“It was hell, let me tell you,” Hayes said, laughing. “It was very complicated. Setting up a wallet, buying cryptocurrency… I’m like, ‘Has there ever been a more difficult way to buy art?’”

Almost certainly not. But a lot of people were doing it and a lot of money was changing hands.

In fact, Hayes still remembers seeing what she considers the NFT sale heard around the world: The Beeple Sale. This was the sale of artist Beeple’s NFT by Christie’s auction house in March 2021.

In Christie’s recording, Beeple watches the bids come in and begins to shake his head in disbelief as the bids reach $50 million, $55 million and finally stop at a surprising $69 million. “Oh my God! $69 million?” he exclaims. “I think this probably means digital art is here to stay. I’m going to Disneyland!”

Getting caught in the NFT gold rush

After that, the sale of NFTs started. At one point, 12,000 NFTs were reportedly being sold every day.

Kyle Heise, a tech worker in San Francisco, participated in a few hundred of those sales. Heise has been collecting NFTs for years and said it was never about the money. They were social: An online group would release some NFTs, sometimes around an event or game, and people would buy them and use them as profile pictures on social media as a way to become part of that group or movement. Used to be – like buying a t-shirt for your favorite band (or a hoodie sweatshirt from your favorite radio show).

A man walks past the “Toxic Skulls Club” NFT billboard in Times Square during the fourth annual NFT.NYC conference in June 2022. (Noam Galai/Getty Images)

But after the Beeple sale, Heise said speculators jumped into the market, money became big and everything changed. Heise was also swept away. He found himself spending more and more on NFTs and remembers one NFT he bought for $3,000.

“I had never even bought a car that cost that much money,” he says. The NFT in question: Pancake Squad #2145. what did it look like?

“I have no idea,” he said (for the record, this is a cartoon of a chubby purple rabbit wearing a little red hat). But Heise doesn’t remember because the photo wasn’t the issue. NFT issuance groups were emerging, Heise liked the artist, and the NFT market caught fire.

“I was like, ‘The price of this is going to go up,’” he recalls. “I knew I could flip this NFT.”

And he turned it. Heise flipped Pancake Squad #2145 for a nice profit, almost doubling his money. Such deals helped push the NFT market to more than $25 billion last year. But just as quickly as it grew, the NFT market crashed. And it wasn’t your typical meltdown: The bottom literally fell out of the NFT market.

Heise said, “I still like them, but they’ve lost their value… They’re worthless now.”

heavy fall from grace

Heise traced the crash to the defunct cryptocurrency that occurred last year. Following several high-profile bankruptcies, the collapse of crypto exchange FTX, numerous scandals, and the trial of Sam Bankman-Fried, the value of cryptocurrencies fell almost across the board.

The NFT market, an offshoot of crypto, suffered an even bigger decline. Kyle Heise estimates that he lost about $5,000 on his NFT investment — and easily escaped. Heise knows people who lost thousands, even hundreds of thousands, of dollars. Some investors lost their life savings. While the value of many cryptocurrencies has recovered significantly, the NFT market has not.

Now, it seems, NFTs have entered their regulatory era: The Securities and Exchange Commission is investigating several operations and recently reached a $6 million settlement with NFT issuer Impact Theory. State regulators are also taking action against several firms, and several former big players are facing prison sentences. At the moment, all kinds of class action lawsuits are impacting the NFT sector.

“People thought they could get away with anything … because it was crypto and because these were tokens,” said John Jasnoch, an attorney at Scott+Scott. He represents a group of investors who lost big on a collection of NFTs known as Bored Ape Yacht Club.

When celebrities dominate NFTs

These were cartoon pictures of apes wearing hats, gold chains, jackets and other accessories, but it wasn’t so much about the pictures themselves as who was buying the apes: Madonna, Gwyneth Paltrow, Steph Curry, Serena Williams, Jimmy… Fallon, Snoop Dogg and Post Malone were all at Bored Ape Yacht Club.

Justin Bieber made $1.3 million on an NFT of a sad-looking monkey wearing a black T-shirt. All that money, publicity, and star power drove demand for the Bored Ape NFT to be, well, an app.

People take photos at the Bored Ape Yacht Club NFT billboard in Times Square in June 2022. (Noam Galai/Getty Images)

“There were certain perks that token holders would get,” Jasnoch explained. “There was access to parties and events. It was really promoted as a way to make friends with the stars.”

Those elbows didn’t come cheap. A customer of Jasnoch paid $400,000 for a bored ape NFT. and now? “The value of those assets has just gone down.”

Jasnoch points to a $1.3 million NFT of Justin Bieber, which as of this summer was worth an estimated $60,000. And, comparatively speaking, Bieber is actually doing okay. Crypto marketing firm DappGamble estimates that 95% of NFTs on the market are now worthless.

A (potentially) new day for NFTs

So is it RIP for NFTs? Probably not.

Proof that the NFT market is starting to come alive again. Prices have stabilized, investment bank UBS has issued a fairly optimistic outlook for the token, and the NFT market is still estimated to be worth around $10 billion.

Art appraiser Claudia Hess said she thinks NFTs are here to stay. She points out that museums including SFMOMA and Center Pompidou have NFTs in their permanent collections. Furthermore, serious galleries like Pace continue to sell NFTs, and – most importantly – artists are still creating them.

“The market is continuing,” Hayes said. “Maybe not at the same pace. Now it’s more about the work and less about the get-rich-quick scheme.” Hayes said he is regularly asked to evaluate NFTs and has worked on how to value digital artworks. Has also written a book.

NFT collector Kyle Heise agrees. NFTs are returning to their roots — more about community, less about profit, he said. Still, he is sticking to his NFT investment.

“Maybe one day, I’ll wake up and have a $2,000 NFT in my wallet,” he said. “You can’t participate in the lottery if you don’t play, right?”

After all, in a world where furry bunnies and monkeys in T-shirts can be worth millions, it seems all bets are off.

Five physical paintings and five unique NFTs will be displayed at Christie’s auction house in New York City in June 2021. (Photo by Noam Galai/Getty Images)

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