Since last month, digital art pieces known as NFTs (non-fungible tokens) have supplanted meme stocks/altcoins. Every crypto investor is trying to get in on the action and most are losing a lot of money. 90% of collections minted today are totally useless and meaningless.
Last week’s $24 million Sotheby’s auction of ape tokens, the $180 million Doge meme and other surreal superlatives from the summer of NFTs have all painted a pixelated picture of easy money. While news headlines will have you believe everyone is becoming a millionare from trading JPEGs, the reality is that most new buyers are left holding the bag (worthless NFTs).
In the 90 days through Monday, roughly 1.9 million assets were sold on the largest marketplace OpenSea. But about three quarters never saw another transaction. For those that do find buyers, the market is dominated by high-profile, high-value works. The most actively traded 3% of collections accounted for 97% of all dollar volume.
NFTs don't always go up in value. Among those with at least 100 transactions, 42% saw their average dollar price drop, while 39% doubled in value or more.
Short Squeez Takeaway: Assessing the fair value of virtual koalas, vampires or eggs is hard for real artists let alone Reddit traders who have never seen another art piece in their life. Any one can mint an NFT and do a drop so there's one happening every other hour. There is no way all these collections have or can maintain any value. In any case, NFT investing is not for the faint-hearted but if you are a YOLO investor this is probably perfect for you.