Once-hyped NFTs now are largely worthless, study finds (Cryptocurrency:ETH-USD)

All things blockchain reached a eurphoric state in 2021. Against that backdrop, certain non-fungible tokens (NFTs) mopped up millions of dollars from buyers. But, after a painful market downturn, the vast majority of those digital collectibles can’t even fetch a penny.

Indeed, a recent study from dappGambl, a community of cryptocurrency researchers, found that 69,795, or 95%, of the 73,257 NFT collections it analyzed have a market cap of zero ethereum (ETH-USD), the world’s most popular altcoin. By its estimates, about 23M investors own these worthless tokens.

To be clear, NFTs are digital assets, such as artwork, GIFs, and music, that are stored on the blockchain and cannot be replicated. The tokens are transferred from one owner to another using blockchain technology, which creates a digital trail from seller to buyer that verifies the transaction. Like other speculative assets, investors buy NFTs in hopes that their values rise, allowing them to be sold at a profit.

“This daunting reality should serve as a sobering check on the euphoria that has often surrounded the NFT space,” the report said. “Amid stories of digital art pieces selling for millions and overnight success stories, it is easy to overlook the fact that the market is fraught with pitfalls and potential losses.”

Lack of demand

dappGambl, using data provided by NFT Scan, also found that there isn’t enough NFT demand to absorb supply, with 29% of collections included in the study remaining unsold. “As a result, projects that lack clear use cases, compelling narratives, or genuine artistic value are finding it increasingly difficult to attract attention and sales.”

At the height of the NFT craze, it was common to see headlines focusing on tokens that sold for millions of dollars. In March 2021, for example, a Beeple artwork NFT sold for $69.3M and former Twitter CEO Jack Dorsey sold his first tweet for over $2.9M.

Now, after filtering out the less significant collections in the study, less than 1% of NFTs have a price tag exceeding $6K, and the majority of the most expensive projects are priced between $5 and $100.

What does the future hold for NFTs?

While many suggest NFTs are in fact dead after the 2021-2022 frenzied bull market, dappGambl believes there’s still a place for them, maintaining its view that “once the dust has settled, we will start to see an evolution within NFTs.”

The researchers argued collectibles like the famed Bored Ape Yacht Club could “lose relevance if they only serve as a profile picture or a ‘flex’ to the have-nots on how much you’re willing to spend on one.” Instead, NFTs should have a historical relevance or they need to be true art or provide tangible utility (that is, a specific function or use case) in order to obtain lasting value, they urged.

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