- NFTs generated billions of dollars and one NFT was sold for nearly $ 70 million.
- Many people question whether the digital assets will maintain their value over time.
- Some investors are comparing the NFT boom to the advent of the internet.
- See more stories on Insider’s business page.
According to data from CryptoSlam, people have spent more than $ 1 billion on digital assets in the past month.
Cryptocraft has been around for more than half a decade, but for many people outside the crypto world, these digital assets, known as non-fungible tokens or NFTs, have apparently come to naught.
So, what drives people to go into the NFT mania, and invest between hundreds of dollars and in some cases millions? Crypto-art investors say it is a combination of several factors, including the pandemic, as well as the rise in bitcoin prices.
In the last few months, crypto artists have drawn more attention than ever before to NFT markets with flashy sales.
Last week, digital artist Mike Winkelmann – more commonly known as Beeple – made history when he sold a crypto piece of art for almost $ 70 million. Other artists such as Grimes and 3LAU also earned millions within hours of dropping crypto art collections.
On the mere proposal of Tesla CEO Elon Musk to sell his own digital asset, the bid reached $ 1 million on Monday before Musk turned down the offer.
Creators and buyers have made a significant profit from crypto-art. In February, Miami-based art collector Pablo Rodriguez-Fraile first showed how profitable the market could be when he resold a piece of Beeple for a nearly 1,000% increase over the original price.
Why do people now buy NFTs?
Rodriguez-Fraile told Insider that the rising price of Bitcoin, the impact of the pandemic and the mistrust in the US dollar created a perfect storm.
Last week, Bitcoin reached a record high of $ 60,000. Since the pandemic started, more people have been saving money. 59% of people with an income of more than $ 100,000 have significantly increased their savings by 2020. As belief in the US dollar appears to be at a low ebb, NFTs may be another way to invest.
“People have been using art for a long time to store value,” Rodriguez-Fraile told Insider. “Crypto is easily expanding into digital art. It’s just a more modern approach to investing in art and using it the way someone would use gold or bitcoin.”
He thinks the NFT boom was accelerated by the pandemic, but ultimately inevitable – a product of the technological boom that would eventually have driven younger generations anyway.
For many artists, especially in the music industry, 3LAU and Grimes’ million-dollar sales have come under the spotlight and created a kind of gold rush, but for buyers, the reasoning is less clear.
Will NFTs maintain their value?
Investor Gary Vaynerchuk, CEO of VaynerMedia, told CoinDesk he believes NFTs are operating under a bubble, but that does not mean they will not have power.
“A lot of people talked about the internet as a fad,” Vaynerchuk said. “In reality, the Internet was this changing revolution of technology, but many of the early projects were just too expensive for the excitement.”
Even Winkelmann admits that NFTs are probably too high.
“If it’s not a bubble right now, I believe it’s probably going to be a bubble at some point because just as many people are storming into this space,” Winkelmann told CoinDesk.
What do you get when you buy an NFT?
When someone buys an NFT, they get the rights to the unique token, but only to the blockchain. If someone buys an image or meme, they can own it on the blockchain, but they have no control over the rights to distribute it.
When you buy an NFT, you are usually not buying content, but rather a sign that connects your name to the art of the creator in the blockchain.
However, the digital signs work on the same deflationary principles as bitcoin. NFTs cannot be duplicated, can be easily verified and are immutable, but there is no safe way to know if they will maintain their value over time.
Billionaire Mark Cuban told Insider Buying NFTs that it’s about scarcity.
“The buyer knows how much will be made and has proof of blockchain ownership,” Cuban told Insider.
Cubans have been a proponent of NFT investing, from buying NBA Top Shot clippings to investing in Mintable, a community-owned digital asset market.
The CEO of SuperRare, another NFT website, told Insider that people are motivated to buy NFTs because it offers a unique connection to the creator that does not exist with any other art form.
Crypto-art has also created entire communities online. Robert Martin, a senior content strategist at Kapwing, told Insider that there is currently a lot of pressure to buy your own NFTs and even create within the crypto community.
NFT buyers are not necessarily fans
The music industry, Cherie Hu, told Insider an artist’s fan base does not dictate their NFT sales. How could that be? How many fans would be able to drop thousands if not millions of dollars on a single digital sign?
Musician Justin Blau, known by his stage name 3LAU, and André Allen Anjos, known as RAC, have been members of the crypto community for more than half a decade. They told Insider many of their buyers are already investors in the crypto world. As artists, they also want to buy the NFTs from other creators.
“The crypto community creates and sells these artworks for each other,” Hu told Insider.
While NFT investors barely make up a large portion of the creator’s fanbase, outside engagement with the crypto community is on the rise.
Platforms like NBA Top Shot spread awareness and offer a broader audience appeal. Hu told Insider that she believes the NFT space will continue to grow, but that it will need to be more accessible to achieve a general appeal.
Read more: Here are 4 NFT startup programs that change the way we buy art and sports memorabilia
NFTs still face several barriers to mass adoption. Most NFT markets require buyers to use a crypto-wallet. Only about $ 70 million people – less than 1% of the world’s population – have a crypto-wallet, according to Blockchain.com.
Creators and buyers should also deal with gas fees associated with decorating and buying a product from the blockchain. These hidden fees can cost hundreds of dollars.
Co-founders of NFT platform Nifty Gateway, Duncan and Griffin Cock Foster, worked to make digital assets more accessible to the general public. It is one of the few platforms with which users can purchase NFTs from the website using their credit card.
“We’re trying to create a space where anyone can be an art collector,” Griffin Cock Foster told Insider.
Rodriguez-Fraile said NFTs represent the future of the art world.
“In a few years, it might just be how people own art,” he told Insider.