The niche cryptocurrency asset, which is a blockchain-based
record of ownership of a digital item such as an image or a video, exploded in
popularity in early 2021, leaving many confused as to why so much money was
being spent on items which do not physically exist.
The frenzy has now reached new highs. Sales volumes recorded
on the largest NFT trading platform, OpenSea, have hit $1.9 billion so far this
month, more than ten times March's $148 million. In January 2021, the monthly
volume recorded on the platform was just over $8 million.
The jump was driven by secondary market sales, OpenSea said.
"What we have seen are a few NFT collections popping up
in the last few weeks that have been very successful at launch and sold out.
That activity has then filtered over to OpenSea where buyers look to flip their
NFTs for a higher price," said Ian Kane, a spokesman for DappRadar, which
tracks the market.
Reuters found one NFT representing an image of a cartoon ape
that was sold on OpenSea for ETH 39 - the cryptocurrency Ether - last week
(around $124,205 at time of purchase), by an account which had bought it for
ETH 22.5 ($61,329) two weeks earlier, according to analytics platform
Etherscan.
Another NFT of an abstract digital artwork sold for ETH
1,000 ($3,322,710) on Monday having been sold for ETH 0.58 ($1,366) in June.
NFT market data varies depending on providers' methodology,
but DappRadar recorded 32 known NFT sales above $1 million in the past 30 days.
MichaelK, a 30-year-old NFT buyer who asked not to give his
full name, said he has spent about $250,000 on NFTs since September. He said he
keeps 90 percent of his wealth in cryptocurrencies and NFTs.
Earlier this month, he bought an NFT of a cartoon penguin
for around $139 worth of Ether, then sold it on four days later for around
$3,956, according to Etherscan.
Other instances of high-return "flips" are visible
on his OpenSea account, including a cartoon squiggle NFT bought for ETH 0.01
($33), then sold for ETH 1.5 ($4,900) within seven hours.
"Bubblicious stupidity"
MichaelK said the US Federal Reserve's ability to control
the money supply played a role in his decision to speculate on largely
unregulated crypto assets.
"When people hear these statistics they might think
that I'm completely crazy... I look back at them and I say, you're holding a
currency that's printed daily, to me you're crazy."
He said COVID-19 forcing people to spend more time at home,
online, helped NFTs take off.
"I don't want to look at it as a bubble. I want to look
at it as something new that's going to be a big wave," he added.
Rising cryptocurrency prices may have also played a role in
the surge. NFTs are often valued in Ether, which has risen around 23 percent in
August.
Rabobank's head of financial markets research for
Asia-Pacific, Michael Every, said that he was "gobsmacked" by the
"bubblicious stupidity" of the NFT market.
He said that he saw the appeal of high returns for young
people who would otherwise struggle to build wealth or get on the housing
ladder, but compared it with buying a lottery ticket.
Every said NFTs were a bubble which would "absolutely" pop. © Reuters
0 comments:
Post a Comment