95% of NFT collections are worthless – what about the other 5%?

Rolling Stone hit clickbait gold when they published an article that showed 95% of NFTs had lost their value. There is no doubt that NFT trading has gone off a cliff after a historic bull market pump. The mania suckered many retail investors who were sadly left holding the bag as people began to realise that a Jpeg of an ape might not survive the rate cycle no matter its provenance.

A report from dappGamb unveiled the startling dataset: a whopping 95% of non-fungible token (NFT) collections are effectively devoid of any significant value. This revelation underscores the pressing need for a critical reassessment of the NFT landscape.

Value void

In an extensive analysis of 73,257 NFT collections, it was discovered that an astonishing 95% of them exhibited a market cap of zero ether. This information was extracted from data sources such as NFT Scan and CoinMarketCap. The implications of this discovery are staggering, with approximately 23 million individuals currently holding these seemingly worthless digital assets.

NFTs, the unique digital assets tied to blockchain technology, have experienced a meteoric rise, particularly on the Ethereum blockchain, during the cryptocurrency bull market of 2021-2022. At their zenith, these NFTs achieved staggering monthly trading volumes of up to $2.8 billion. 

However, dappGambl’s findings have effectively dampened the once-exuberant sentiment surrounding NFTs. Presently, a significant 79% of all NFT collections remain unsold, indicating a buyer’s market marked by a surplus of supply relative to demand. 

Even when focusing on higher-value projects, a disheartening reality emerges. Among the top 8,850 collections ranked by market cap, 18% are devoid of significant worth, while 41% linger within the price range of $5 to $10. Remarkably, less than 1% command a price tag exceeding $6,000, representing a stark contrast to the million-dollar transactions witnessed in earlier years.

Mind the gap

Furthermore, the study underscores a conspicuous disparity between the listed prices of NFTs and their actual sales. This incongruity suggests that many sellers are holding out in anticipation of a resurgence in NFT interest, reminiscent of the 2021 boom, a resurgence that may never materialise.

But all that said, we believe NFTs are not going anywhere. NFTs have played a significant role in the democratization of art for several important reasons and will reshape the art world regardless of future waves of speculative gambling. Below, we map why NFTs are here to stay as an important art medium. 

Why NFTs are (still) changing the art game

Accessibility: NFTs have made it possible for artists to showcase their work on digital platforms, allowing them to reach a global audience without the need for traditional gatekeepers like galleries or art dealers. This means artists from diverse backgrounds and locations can gain recognition.

Ownership and Provenance: NFTs provide a secure and transparent way to prove ownership and authenticity of digital art. Blockchain technology ensures that provenance and ownership history are easily traceable, preventing unauthorized copies or forgeries.

Monetization for Digital Art: Previously, digital artists often struggled to monetize their work, as it was easy to copy and share online. NFTs allow digital artists to sell unique, collectable versions of their work, creating new income streams and financial incentives to create more digital art.

Decentralized Marketplaces: NFT marketplaces, like OpenSea, Rarible, and Foundation, operate in a decentralized manner, allowing artists to list their work without the need for intermediaries. This empowers artists and reduces the fees and commissions typically associated with traditional art markets.

Fractional Ownership: NFTs can be divided into smaller fractions, allowing art collectors and enthusiasts to invest in high-value artworks collectively. This enables a more diverse group of people to become part-owners of valuable art pieces.

Community and Engagement: NFT platforms often foster communities around artists and their work. Collectors and fans can engage with artists directly, building a closer and more democratic relationship between creators and their audiences.

Licensing and Royalties: Smart contracts associated with NFTs can automatically enforce royalties for artists. This means that artists can continue to benefit financially from the resale of their work, even after the initial sale.

Experimental Art Forms: NFTs have encouraged experimentation with new and interactive art forms that may not have found a place in traditional art spaces. Digital artists are exploring the boundaries of what art can be in the digital age.

NFTs and their impact on art also come with challenges and criticisms, including concerns about environmental sustainability, market speculation, and the potential for copyright infringement.

Statistics around the value of collections are sobering. Proponents of NFTs must admit is that a whole lot of NFTs were digital art junk with wildly inflated prices. But what sceptics must also concede is that NFTs have, like it or not, ushered in a new paradigm in art democratisation led by young and exciting artists. We believe true art created will continue to hold value in the decades to come. Like all art, the real value will lie in a small group of collections. We identify some of the NFT artists we believe, in time, will be seen as the pioneers of the NFT age. 

The new wave

Osinachi – challenging social stigmas

This Nigerian artist found his artistic calling when his father brought home a computer at the age of 15. He began experimenting with digital art, creating images using Microsoft Word. As he honed his craft and sought to showcase his work through traditional galleries, he faced rejection.

However, in 2017, Osinachi discovered the potential of selling NFTs using blockchain technology. In those early days, before NFTs had gained widespread recognition, limited edition prints of his work were often sold for as little as $60. 

This marked a significant shift in the art world, highlighting the democratization of art. No longer confined to traditional gatekeepers, artists like Osinachi could directly reach a global audience through online marketplaces like SuperRare, OpenSea, and Nifty Gateway.

At a Christie’s auction in October 2021, Osinachi’s work commanded a price of more than $68,000, demonstrating the growing value and acceptance of NFTs in the art world – even if that faith has been brutally tested by the market cycle. 

This recognition by a renowned international auction house like Christie’s not only validated the potential of NFTs but also became a triumph for African digital artists. It underscored that artists from diverse backgrounds could participate in the art world, breaking down traditional barriers and ushering in a new era of art democratization.

Man in the Window, Osinachi.

XCopy – beauty in dystopia 

XCopy, a prominent figure in the world of digital art, has established a strong presence as a pioneering NFT artist. Despite maintaining anonymity regarding personal identity, XCopy is widely celebrated within the NFT community

One of his most renowned NFT creations, the “Right-click and Save As” guy, achieved significant fame. This iconic NFT serves as a satirical commentary on digital art critics who argue that the online art space is devoid of value, suggesting that art can be obtained with a mere mouse click.

XCopy also garnered considerable attention for his Nifty Gateway collection titled “Max Pain”. XCopy’s digital art often delves into darker themes, invoking a sense of the macabre and a dystopian world marked by grim and unsettling imagery.

Tyler Hobbs – creative coder

Only a select few digital artists have weathered the storm of the crypto crash and the steep decline in NFT sales records. Among them, Tyler Hobbs stands out as one of the rare artists who has emerged largely unharmed, boasting a devoted following of collectors from the tech realm and earning recognition from the conventional art sphere. 

He recently showcased his physical creations at Pace Gallery, aligning with the growing trend of galleries embracing NFTs and prominent museums incorporating digital art into their exhibition spaces. He recently turned his generative art into tattoos.

Fidenza #313, Tyler Hobbs.

While the NFT market has experienced turbulence, the potential for art democratization and the lasting value of genuine artistic creations are undeniable. The lessons learned from the NFT market’s fluctuations will likely shape the future of art and redefine how artists, collectors, and enthusiasts engage with creative expression in the digital age.

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