The value of non-fungible tokens, or NFTs, is plummeting amid renewed questions about what cryptocurrencies are worth.
The crypto world suffered a major blow last week when FTX Trading declared bankruptcy amid a $8 billion shortfall. The fallout is now affecting the digital collectibles realm, said NFT expert Connor Borrego.
The price of “The Currency,” a collection of NFTs by celebrated artist Damien Hirst, fell 12.6% to $4,666.60 on Friday while Moonbird NFTs fell 4.7% to $8,397.50 and Bored Ape Kennel Club fell 8.3% to $4,672.60, according to NFT Price Floor.
FTX’s bankruptcy has pushed down the price of some cryptocurrencies, shrinking the buying power NFT collectors enjoyed in the past, Borrego said. Most collectors buy NFTs using cryptocurrency, although many marketplaces also accept traditional payment options like credit cards.
An NFT gives someone proof of ownership of a digital object, or access to services, using a unique code on the blockchain that is linked to an image or video. NFTs can be transferred or sold but because of their unique codes, they cannot copied or divided into smaller parts like other tokens. Some people buy NFTs in the hope their value will rise, while others buy them strictly for bragging rights or to participate in an emerging tech trend.
A “Bored Ape Yacht Club” NFT that Justin Bieber bought for $1.3 million in January is now worth $70,000, Insider reported.
Although NFT sales have slumped, the bright side is “it’s much cheaper to buy the expensive NFTs,” Borrego added.
Expect more scrutiny
NFTs were all the rage last year as artists, athletes, celebrities and big retailers used the emerging technology to hawk digital versions of their wares. But FTX’s collapse now means crypto companies must work to rebuild customer confidence, industry leaders said.
Account holders were “really hurt financially” by FTX’s meltdown, and they will remember how much they lost, Binance CEO Changpeng Zhao said at a TechCrunch crypto conference in Florida on Thursday.
“That’s going to really shake confidence in trust credibility in this industry,” he said. “So now, people are withdrawing funds from centralized exchanges, and the volume [of transactions on an exchange] will decrease. The regulators all around the world will be scrutinizing us very heavily going forward.”
The hype around NFTs was starting to wane this year even before FTX went belly up, recent data shows. Bored Ape Yacht Club has seen its market cap fall by $2 billion in the past seven months, according to Crypto Presales.
Sales of NFTs fell to $1.6 billion globally in the third quarter this year, down 77% drop from $7.3 billion in the second quarter, according to NFT sector tracker Nonfungible. The number of active wallets holding NFTs fell 52% during that same time period, suggesting that customers are deciding to hold their NFTs instead of selling them at a loss, Nonfungible said.
Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.
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