Crypto

Can supply of nonfungibles outweigh demand?



Nonfungible tokens, or NFTs, have taken the cryptocurrency sector by storm in 2021. The rising curiosity in these digital collectibles resulted in record-breaking buying and selling volumes in the course of the month of August, with particular person NFT gross sales exceeding more than $1 million dollars frequently. 

Yet with so many NFTs at the moment available on the market, it may be tough to find out which one-of-a-kind collectibles are well worth the excessive costs. It’s additionally essential to level out that though NFTs are going mainstream, they’re immediately tied to the cryptocurrency ecosystem and, subsequently, are vulnerable to market volatility.

For occasion, data reveals that the overall quantity of NFTs traded on main marketplaces declined at the start of September, across the similar time Bitcoin (BTCdropped below the $43,000 mark.

Uncovering the worth behind extremely sought-after NFTs

Although NFT buying and selling quantity has continued to deflate this month, extremely sought-after tasks similar to CryptoPunks and EtherRocks are nonetheless seeing high-priced gross sales. While these had been each some of the primary items of artwork to be featured on the Ethereum blockchain, Andrew, founding chief advertising officer of stablecoin undertaking Reserve.org, informed Cointelegraph that he believes EtherRocks, specifically, will proceed to rise in worth as a consequence of the truth that solely 100 had been 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 artwork platform Art Blocks, informed Cointelegraph that, generally, CryptoPunks function independently from the general 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 mentioned.

Due to the restricted quantity of CryptoPunks and EtherRocks available on the market, the house owners of these NFTs can also be extra hesitant to promote. According to Andrew, EtherRock house owners will almost certainly by no means promote just because they need to be a component of crypto historical past: “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 flip, Andrew defined that EtherRock NFT holders immediately turn out to be half of an unique membership, which additionally triggers astronomical costs 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 expertise, Fungibles, CEO of Greenleaf Ventures, informed Cointelegraph that he bought his EtherRock after receiving a private message from social media guru Gary Vaynerchuk in regards to the undertaking:

“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 historical past behind the undertaking, Fungibles talked about that EtherRocks additionally make for the right 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 additionally identified that some of essentially the most sought-after NFTs in the present day additionally present house owners with entry. Specifically talking, he defined that proudly owning an EtherRock offers people with entry to unique gatherings world wide whereas additionally permitting this group to vote on particular issues that may assist transfer the worth 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, additional informed Cointelegraph that SkyBridge simply announced the launch of Flatter, an NFT platform that mixes unique experiences with sought-after collectibles. According to Scaramucci, Flatter goals to show conventional collectors to a broader market the place they’ll expertise digital artwork and experiences in a novel and thrilling approach: “Flatter NFT owners will have access to a community that includes shared experiences, events, early and exclusive access to happenings.”

Although the platform was simply launched, Flatter might probably showcase the completely different potentialities supplied by NFTs to conventional buyers, particularly as established artwork collectors start to enter the NFT sector. Speaking on the NFT panel throughout SkyBridge’s annual SALT convention, Noah Davis, specialist and head of digital artwork and online gross sales at Christie’s, talked about that many established artwork collectors partook in Christie’s Andy Warhol NFT auction in May this 12 months. Davis famous that three out of 5 of these collectibles went to blue-chip artwork consumers, mentioning that there’s a shift towards NFTs occurring in the true world.

Too a lot supply, however not sufficient demand?

While extremely sought-after NFTs might have sure traits, an inflow of new NFTs continues to flood the cryptocurrency market every day. But even when these NFTs boast rarity, distinctive options and accessibility, the query as as to whether or not an excessive amount of supply will exceed demand stays. Moreover, if that is so, NFTs are sure to lose worth over time.

Jason Lau, chief working officer of cryptocurrency alternate Okcoin, informed Cointelegraph that NFTs can in the end be created by anybody with web entry however {that a} a lot smaller inhabitants is interested by proudly 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 unique opinion on the matter, although, noting that “too much supply” is a counterintuitive idea when you’ve got a whole bunch of artists eager to showcase their work in a approach that has by no means existed earlier than.

Related: Novi-FT? Facebook’s NFT support may not drive crypto adoption

In phrases of worth misplaced over time, Lau identified that there are quite a bit of parallels between NFTs and conventional artwork. As a end result of supply probably outweighing demand, he believes that some NFTs will inevitably lose worth, whereas others will accrue in worth as new creators and experiences rise in recognition.

Santiago Roel Santos, a decentralized finance investor, additional informed Cointelegraph that though not all NFTs will maintain their worth, he does anticipate to see the subsequent Picasso emerge from this motion: “At this point, every major artist, creator and studio is thinking about NFTs and have a strategy.” But even when worth is misplaced, Fungibles stays 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.”