NFTs may never get off the canvas again

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Instalación de arte de Refik Anadol, luego convertida en NFT y subastada en Sotheby

With rates rising, non-interest-bearing assets must have something special to be attractive

The hype train of the tokens non-expendable is derailing. NFTs have exploded in recent years by offering their owners the ability to claim sole digital ownership of a prized work of art through blockchain. Unfortunately for its proponents, this asset class is now in decline, showing disconcerting signs of permanence.

NFTs are having a rough 2022, to put it mildly. In January, data aggregator CryptoSlam recorded $4.8 billion in NFT sales. In October, this figure had fallen by more than 90%, to below 500 million.

The decline of NFTs is not surprising, as their market is closely tied to cryptocurrencies, which have undergone a similar implosion. Most NFTs are bought and sold with Ether, a cryptocurrency that has seen a sharp drop in value this year, and are authenticated through the Ethereum blockchain. The total market value of all cryptocurrencies has plummeted from nearly $3 trillion a year ago to around $1 trillion.

NFT experts are optimistic that this asset class can continue to evolve. NFTs could become a key component of Meta Platforms boss Mark Zuckerberg’s metaverse concept, connecting the physical and digital worlds. They could be used, for example, to authenticate people’s digital possessions in the virtual space of the social network. However, given Meta’s recent troubles, it appears that investors are also losing patience with the metaverse experiment.

Another possible ray of hope is the continued interest of brands like Lacoste in adopting NFTs. However, Lacoste’s so-called Undw3 NFT range mimics the traditional collector’s craze of owning digital assets, selling unique digital versions of the company’s famous crocodile. It doesn’t look much different than what already exists.

Ultimately, NFTs have the same problem as any other niche asset that had appeal in the era of low interest rates, which is now disappearing. The president of the Federal Reserve, Jerome Powell, has raised the price of money, and it will go higher. With less money to spare hanging around, non-interest-bearing assets need to have something special to make them worthwhile. It is not clear that NFTs have it.

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Brian Adam
Professional Blogger, V logger, traveler and explorer of new horizons.