Nonfungible tokens, or NFTs, have taken the cryptocurrency sector by storm in 2021. The growing interest in these digital collectibles resulted in record-breaking trading volumes during the month of August, with individual NFT sales exceeding more than $1 million dollars on a regular basis.
Yet with so many NFTs currently on the market, it can be difficult to determine which one-of-a-kind collectibles are worth the high prices. It’s also important to point out that although NFTs are going mainstream, they are directly tied to the cryptocurrency ecosystem and, therefore, are prone to market volatility.
For instance, data shows that the total volume of NFTs traded on leading marketplaces declined at the beginning of September, around the same time Bitcoin (BTC) dropped below the $43,000 mark.
Uncovering the value behind highly sought-after NFTs
Although NFT trading volume has continued to deflate this month, highly sought-after projects such as CryptoPunks and EtherRocks are still seeing high-priced sales. While these were both some of the first pieces of art to be featured on the Ethereum blockchain, Andrew, founding chief marketing officer of stablecoin project Reserve.org, told Cointelegraph that he believes EtherRocks, in particular, will continue to rise in value due to the fact that only 100 were created. “Punks, Rocks and Kittens are all classic 2017 ‘art’ of Ethereum crypto. However, there are thousands of kittens and punks and only 100 rocks.”
Echoing Andrew, Snowfro, founder of the NFT art platform Art Blocks, told Cointelegraph that, in general, CryptoPunks operate independently from the overall market. “There are only 10,000 of them, and in the end, it’s clear that more than 10,000 people want to own one, so there will likely always be strong interest in Punks,” they said.
EtherRock 73 purchased for Ξ790 Ether ($2,607,584.60)— EtherRock Price (@etherrockprice) September 8, 2021
10 hrs 50 mins ago (Sep-07-2021 08:03:49 PM +UTC)
Txn: https://t.co/wo403bWFPC #EtherRock #EtherRocks pic.twitter.com/01lhQOoye0
Due to the limited amount of CryptoPunks and EtherRocks on the market, the owners of these NFTs may also be more hesitant to sell. According to Andrew, EtherRock owners will most likely never sell simply because they want to be a part of crypto history: “One of the reasons Van Gogh pieces are so highly valued is because of their historical significance. The same could possibly be said of the historical significance of an EtherRock.” In turn, Andrew explained that EtherRock NFT holders instantly become part of an exclusive club, which also triggers astronomical prices for EtherRocks: “The ultimate logic for me is that in the next three to 30 years, NFTs created in 2017 will be extremely treasured. Almost like ancient art.”
Speaking from experience, Fungibles, CEO of Greenleaf Ventures, told Cointelegraph that he bought his EtherRock after receiving a personal message from social media guru Gary Vaynerchuk about the project:
“At the time, there were only three rocks left selling for 8.5 ETH each. I had a good feeling about the project because it was from 2017, and there were only 100 rocks ever created. I pulled the trigger and then sent out a tweet about why I purchased a $24,000 rock.”
In addition to the rarity and history behind the project, Fungibles mentioned that EtherRocks also make for the perfect meme: “If this project takes off, it shows that there is something beautiful about something so horrible looking that could eventually go to zero. This makes for the perfect meme and collectible.”
Fungibles also pointed out that some of the most sought-after NFTs today also provide owners with access. Specifically speaking, he explained that owning an EtherRock provides individuals with access to exclusive gatherings around the world while also allowing this group to vote on specific things that can help move the value of EtherRocks up over time: “Communities are coming together around this token, which means gaining access to certain things. For me, this is a long-term investment.”
Anthony Scaramucci, founder of SkyBridge Capital and SALT, further told Cointelegraph that SkyBridge just announced the launch of Flatter, an NFT platform that combines exclusive experiences with sought-after collectibles. According to Scaramucci, Flatter aims to expose traditional collectors to a broader market where they can experience digital art and experiences in a unique and exciting way: “Flatter NFT owners will have access to a community that includes shared experiences, events, early and exclusive access to happenings.”
Although the platform was just launched, Flatter could potentially showcase the different possibilities offered by NFTs to traditional investors, especially as established art collectors begin to enter the NFT sector. Speaking on the NFT panel during SkyBridge’s annual SALT conference, Noah Davis, specialist and head of digital art and online sales at Christie’s, mentioned that many established art collectors partook in Christie’s Andy Warhol NFT auction in May this year. Davis noted that three out of five of these collectibles went to blue-chip art buyers, pointing out that there’s a shift toward NFTs occurring in the real world.
Too much supply, but not enough demand?
While highly sought-after NFTs may have certain characteristics, an influx of new NFTs continues to flood the cryptocurrency market daily. But even if these NFTs boast rarity, unique features and accessibility, the question as to whether or not too much supply will exceed demand remains. Moreover, if this is the case, NFTs are bound to lose value over time.
Jason Lau, chief operating officer of cryptocurrency exchange Okcoin, told Cointelegraph that NFTs can ultimately be created by anyone with internet access but that a much smaller population is interested in owning them:
“Eventually, supply will outweigh demand. This is very much like any other creator-based economy. For NFTs, we are still in an early stage, and a lot of exploration is being done by both creators and owners — how we eventually reach equilibrium remains to be seen.”
Snowfro has a different opinion on the matter, though, noting that “too much supply” is a counterintuitive concept when you have hundreds of artists wanting to showcase their work in a way that has never existed before.
Related: Novi-FT? Facebook’s NFT support may not drive crypto adoption
In terms of value lost over time, Lau pointed out that there are a lot of parallels between NFTs and traditional art. As a result of supply potentially outweighing demand, he believes that some NFTs will inevitably lose value, while others will accrue in value as new creators and experiences rise in popularity.
Santiago Roel Santos, a decentralized finance investor, further told Cointelegraph that although not all NFTs will hold their value, he does expect to see the next Picasso emerge from this movement: “At this point, every major artist, creator and studio is thinking about NFTs and have a strategy.” But even if value is lost, Fungibles remains optimistic:
“There will be a bear market, and certain NFTs will be less than they are today, but this will also enable new buyers to come in and for EtherRocks to change hands. I think there will always be a market regardless of the price.”