Sales of non-fungible tokens (NFT) surged in August, according to the biggest platform for the growing digital asset class, as speculators bet growing interest in the arts, sports and media worlds will keep prices rising.
The niche cryptocurrency asset, which is a blockchain-based record of ownership of a digital item such as an image or video, exploded in popularity in early 2021, leaving many confused as to why so much money was being spent on items that they don’t physically exist.
The frenzy reached new levels. Sales volumes recorded on the largest NFT trading platform, OpenSea, have reached $1.9 billion (about Rs. 14,100 crores) so far this month, more than ten times the $148 million in March (about Rs. 1,100 crores). As of January 2021, the monthly volume recorded on the platform was just over $8 million (about Rs. 60 crores).
The jump was driven by sales in the secondary market, OpenSea said.
“What we’ve seen are some NFT collections coming up in the last few weeks that have been very successful in launching and sold out. That activity then filtered into OpenSea, where buyers are looking to trade their NFTs for a higher price,” said Ian Kane, spokesman for DappRadar, which monitors the market.
Reuters found an NFT depicting an image of a cartoon monkey that was sold at OpenSea for 39 ETH – the Ether cryptocurrency – last week (about $124,205 [roughly Rs. 92 lakhs] at the time of purchase), from an account that purchased it for 22.5 ETH ($61,329 [roughly Rs. 45 lakhs]) two weeks earlier, according to the Etherscan analytical platform. The price of ether in India was at Rs. 2.45 lakhs from 4pm IST on August 25th.
Another NFT of an abstract digital artwork retails for 1,000 ETH ($3,322,710 [roughly Rs. 24 crores]) on Monday having been sold for 0.58 ETH ($1,366 [roughly Rs. 1 lakh]) in June.
NFT market data varies depending on providers’ methodology, but DappRadar recorded 32 known NFT sales over $1 million (approximately Rs. 7.4 crores) in the last 30 days.
MichaelK, a 30-year-old NFT buyer who asked not to reveal his full name, said he has spent around $250,000 (about Rs. 1.8 million) on NFTs since September. He said he keeps 90 percent of his wealth in cryptocurrencies and NFTs.
Earlier this month, he bought an NFT of a cartoon penguin for about $139 (about Rs. 10,310) worth Ether, then sold it four days later for about $3,956 (about $3,956 (about Rs. 10,310) of Rs. 2.9 lakhs), according to Etherscan.
Other instances of high-return flips are visible in your OpenSea account, including an NFT cartoon purchased for 0.01 ETH ($33 [roughly Rs. 2,450]), then sold for 1.5 ETH ($4,900 [roughly Rs. 3.6 lakhs]) within seven hours.
MichaelK said the US Federal Reserve’s ability to control the money supply played an important role in its decision to speculate on largely unregulated cryptographic assets.
“When people hear these statistics, they might think I’m completely crazy… I look back and say, you’re holding a coin that prints daily, to me you’re crazy.”
He said COVID-19, forcing people to spend more time at home online, helped the NFTs take off.
“I don’t want to see it as a bubble. I want to see it as something new that will be a big wave,” he added.
The increase in cryptocurrency prices may also have influenced the increase. NFTs are typically rated on Ether, which rose by about 23 percent in August.
Rabobank’s head of financial markets research for Asia-Pacific Michael Every said he was “awestruck” by the “bubbling stupidity” of the NFT market.
He said he saw the appeal of high returns for young people who would otherwise struggle to build wealth or climb the housing ladder, but compared that to buying a lottery ticket.
All said NFTs were a bubble that would “absolutely burst”.
© Thomson Reuters 2021