When crypto kitties burst onto the scene in 2017, many people saw the collectible digital cats as a joke. A cute joke but a joke nonetheless. Analysts showed up to 2100% growth in the first three months. Artwork by a collector called Beeple is fetching close to $70 million, a flying Pop-Tarts rainbow cat is fetching about $600,000, and millions of dollars’ worth of digital content is changing hands daily on OpenSea.
“Necessity is the mother of invention.”-Plato
Not Just a fad (NFTs Unaffected by Crypto Winters)
According to Shark Tank host and Canadian investor Kevin O’Leary, NFTs are not just a fad. They are here to stay. He says he is bullish on NFTs for the long term. The digital arts industry It has been long due for disruption. An opportunity for creatives to get rewarded for their imagination and creativity. For them to connect on a deeper level with their fans who are proud to own their works.
The tracking and validation capabilities of NFTs are what has attracted Kevin O’Leary to the fray. He believes it is going to be phenomenal.
Are NFTs Unaffected by Crypto Winters?
This is an important question. It can give us a hint on the trend of capital flow. It might point us in the right direction when thinking about how we can allocate our capital when the cryptocurrency market is underperforming. This question then becomes whether NFTs can be a hedge of some sorts against corrections in the cryptocurrency markets.
Many experts are of the opinion that NFTs are indeed isolated from crypto prices. Alex Lorenzo has a flow model for money in crypto. These facts are backed by historical statistics and charts.
Bitcoin -> Ethereum ->Large caps -> Medium caps -> Small caps
Presently, while the crypto market is going through a correction, NFTs are pumping. The Bored Ape Yacht Club has continued to add celebrities to its project. In the past week, Justin Beiber bought an ape from the collection. The floor price is now over 100ETH due to price speculation. The more celebrities, the more the hype and this drives up the price. Other top collections are also doing very well. It would seem this is where the money is flowing at this point.
A few months ago, the floor price of the World of Women NFT collection was 0.2ETH. Now it is almost 10ETH. The rankings on OpenSea show that many collections have experienced gains of triple digits. As the normal crypto market has been experiencing a bear market, the NFT market has been pumping.
Historical Impact of Economic Downturn on Art
There are some parallels (although not perfect) about the impact of economic downturn on art. As expected, economic downturn leads to reduced purchase of art. Art falls under category of items that involve discretionary spending. During the financial crisis of 2007/2008, Sotheby’s saw its revenue plummet by almost 50%.
Although physical artwork offers holders less utility compared to most NFT collections today. For instance, some NFTs can be used in games as player card, and as concert tickets, amongst others. However, economists agree that when there is scarcity of funds, consumer spending drops. This is why the US government introduced stimulus packages- to encourage consumer spending and keep the economy flowing. Therefore, the crypto winter is likely going to affect the NFT space.
NFT maximalists see the world in terms of ETH, but for most of us, we look at the USD price as the reality check when evaluating NFTs. This would continue to be true for the foreseeable future.
Utility of NFTs
NFTs have not gained public attention only because of novelty. They have a range of applications that helps to boost their value. Apart from being intriguing and refreshing to look at, they also have other utility. Even if you were sure that most current uses of NFTs were unclear, it would still be impossible to state all the uses of NFTs. Dismissing NFTs today is like dismissing websites in the 1990s. Just like websites can become static blogs, social media, or SaaS, NFTs can also assume different uses.
From another perspective, Art NFTs are a great use case. For anyone spending significant time in the digital world, it makes sense to bring things from the real world that are important to them into the digital space. and gaming NFTs are promising. They can also have utility as ticketing or community access tokens. One great thing about the digital world is that artists can have their work seen by many consumers. This helps them to get paid continuously as more people come to appreciate it.
Conclusion
Whether you use NFTs as a financial investment into a new stream of art, or as a way to broaden your portfolio, NFTs have various uses. Regardless of the depth of your knowledge of the world of NFTs, there is no harm participating. You may pat yourself on the back in the near future for deciding to own some NFTs. These are early days. There are great things to come in this space.
