Nfts
NFTs retain their value, researchers say
Visitors view non-fungible token (NFT) artworks at an exhibition titled Indo NFT Festiverse at the… [+] RJ Katamsi Gallery, Indonesian art university that combines art and technology in Yogyakarta on April 13, 2022. – (Photo by DEVI RAHMAN / AFP)
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If the headlines are to be believed, the non-fungible token market appears to be a flash in the pan. The asset class peaked at $21 billion in May 2022 before crashing back to Earth. More than 95% of the NFTs created during the 2021-2022 NFT craze are now worthless. according to dappGambl researchers.
However, upon closer inspection, the situation seems a little different. The market capitalization of NFTs is solid today 10 billion dollarsdriven by the 5% of NFTs that have retained their value. The ten largest artist collections are worth a combined $2.5 billion, having retained 73% of their value compared to a year ago.
Top 10 NFT Artists by Market Cap, Year-over-Year Change
https://app.nftvaluations.com/
Compare that to modern art sales, which last year totaled $3.1 billion, 67% of their all-time high. Over the past decade, total sales have fallen 12% in 2022, 31% in 2022, 31% in 2019, and 43% in 2016. This kind of volatility is a hallmark of the broader art market, which is sensitive to fluctuations in the wealth of high-net-worth individuals. Sales often drop precipitously one year and rebound the next, like the stock market.
Modern Art Sales 2013 – 2022
The Art Basel and UBS 2023 Art Market Report
The reality is that despite the current decline in market capitalization, NFTs continue to rapidly take their place in the art industry. Headline sales continue, as CryptoPunk 5066which recently sold for $1.5 million. Sotheby’s And Christie’s have both built teams specializing in digital assets and organized NFT sales. At the same time, many museums are acquiring NFTs in their permanent collections, including Pompidou, LACMAAnd MoMa Museum. ICA Miami exposed CryptoPunk #305 alongside Kay Fortson (an American lady) by Andy Warhol.
Perhaps the best measure of the sustainability of the NFT market comes from the art-backed loan market.
Outstanding loans secured by traditional art totaled between $27 billion and $31 billion in 2022. Private banks such as Goldman Sachs and Morgan Stanley
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Auction houses like Sotheby’s and specialty companies like Borro and Athena all offer loans. Lenders typically offer up to 60 percent of fair market value and charge interest rates of 6 to 10 percent, depending DeloitteThese are multi-year loans, which means that the financiers are confident that the artwork will retain its value over time.
The NFT lending market reflects these conditions. Loans on top NFT collections are available for up to 75% of fair market value with interest rates of 8% to 10%, as shown on Gondi.xyz. More importantly, durations are getting longer, implying that investors are betting that the value of NFTs will endure. Last week, investors extended three-year loan backed by an NFT on a Chromie Squiggle, the longest loan ever recorded.
Rather than fading, the debate over NFTs “has shifted to the longer-term impact of blockchain applications on the art market,” according to the annual report. Art Basel and UBS Art Market Report.
The NFT market has fallen significantly since its 2022 peak, but the trough appears to be over. Recent sales indicate that the market is stabilizing, with works by top artists consolidating their value in the billions. This dynamic is common in new markets, such as the dot-com boom of the 1990s and the initial cryptocurrency offering craze of 2017. While most new entrants fail, the highest-quality projects survive and thrive. The NFT market is following a similar trajectory. Serious artists continue to produce thoughtful NFTs while the medium solidifies its place in the global art market. As this trend continues, we can expect overall interest in NFTs to increase.