Understanding The Cycles Of Hype And Value In NFTs

Non-fungible tokens (NFTs) have ushered in a new era of digital collectibles, enabling individuals to express their identities, interests, and affiliations through unique digital assets.

As the value of these assets fluctuates with the popularity of interests and fandoms, it is crucial for collectors to understand the dynamics of ownership, authenticity, and the ever-changing nature of interests.

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In the past, we encountered items that rose to massive appeal in short periods leading to shortages and nationwide attention. Tickle-Me-Elmo and Furbies are two examples of this. Even during their hype, it would be hard to imagine that these items would remain popular and valuable forever. A large part of the surge pricing for these toys on the secondary market was a shortage in supply played against the demanding children who wanted them in time for the holidays.

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Holistically there is nothing fad-like about NFTs as a technology, just in the same way that I believe plush toys with robotic features will continue to be produced and sold to children that adore them. However, a specific NFT or collection is only as valuable as the interest that its collectors show in it. Every type of collection changes in value over time, not always upward.

To appreciate how this new world of digital goods works from a collector’s mindset, it’s critical to understand ownership as a means of identity, the need for certifying authenticity, and that interests change over time.

What Ownership Means To Collectors

Collecting and owning physical items has long been a way for individuals to express their identities, interests, and affiliations. From sports memorabilia and stamps to autographs and rare editions of books, collectors take pride in curating their collections as a tangible representation of their passions and values. With NFTs, this process of identity formation and self-expression has transitioned into the digital realm, providing new opportunities for individuals to showcase their interests and connect with like-minded people.

NFTs serve as the digital counterpart to traditional collectibles, allowing users to own, trade, and display unique digital assets that represent their interests and fandoms. Whether it’s digital art, virtual real estate, or tokens representing a beloved musician or sports team, NFTs allow collectors to cultivate their digital identity and showcase their passions to the world.

The value of NFTs as identity-forming items is closely tied to the desire of individuals to associate with specific interests, communities, or cultural phenomena. As the popularity and relevance of certain interests and fandoms fluctuate, so too does the value of the NFTs associated with them. This dynamic interplay between identity and value reflects the complex relationship between personal expression, cultural trends, and market forces.

Authenticity

Similar to physical goods, once any NFT becomes popular counterfeits arise.

While the blockchain brought the promise of verifiable authenticity, it made it easier to fool consumers than ever before. Much like how just because something is online doesn’t mean it’s true, the same fact applies to the blockchain. If an NFT exists and looks like a real NFT, it simply means someone uploaded that image to the blockchain, not that it’s authentic.

As with any collectible, the authenticity and provenance of an NFT play a crucial role in determining its value. In the digital realm, provenance refers to the origin and ownership history of the asset, which can help verify its authenticity. Blockchain technology enables the tracking of NFTs through a decentralized and transparent ledger, but collectors should still be cautious when acquiring new digital assets.

To ensure the authenticity of an NFT, it is essential to research the artist, project, and platform associated with the asset. Reputable platforms and projects often have dedicated communities and social media profiles that can provide information about the NFT’s legitimacy. Additionally, the blockchain record can be consulted to verify the asset’s creation, transfer history, and ownership.

From a fan or collector’s point of view, there is shame in owning a fake item, their desire to collect comes from the want to be part of something greater than themselves. From the trader’s point of view, however, the only thing that matters is the ability to flip a collectible for a profit, even if it’s fake. The desires of the collector furl the value of the market of collectibles and traders can leverage that to earn from selling or scamming.

Interests Change Over Time

If you didn’t get my original reference to Tickle-Me-Elmo or Furbies, you’ve proven my point. Interests change over time and sought and collected items like Pogs, Sportscards, and more fall in and out of fashion.

What makes something popular is hard to describe and even harder to plan for or control, the same is true for what causes something to fall out of popularity. As new things emerge they distract the attention from those who were previously interested in something else, and over time some collections lose fans from nothing more than fatigue. Know that nothing lasts forever, NFTs are a way of making and tracking, not the brand that people want itself.

The Future of NFTs: Excitement and Caution

While NFTs provide a unique and engaging way to own, trade, and appreciate digital assets, it is essential to approach this market with both excitement and caution. Understanding provenance, conducting thorough research, and being aware of hype and depreciation cycles can help collectors and investors make informed decisions.

While this seems new, it’s the same as collectibles have always been. Would you spend your life savings on a new popular baseball card?

Ultimately, as our digital identities continue to evolve and intertwine with the physical world, NFTs offer a fascinating glimpse into the future of digital ownership and the complex dynamics that govern its value.

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