Justin Bieber paid $1.3m for a Bored Ape NFT (Non-Fungible Token) in January last year. But by November, Insider suggested it was only worth $70k after crypto exchange FTX collapsed.
Last week, as the chart shows, reports suggested “Bored Ape Yacht Club” NFT prices had crashed again, taking them down 88% from their $1bn peak.
It’s part of a fantastical tale of riches to rags.
But first, what is a NFT? Here’s Decrypt’s ‘Beginners Guide’:
“Non-fungible tokens are digital assets that contain identifying information recorded in smart contracts. They can be used for digital assets that need to be differentiated from each other in order to prove their value, or scarcity. They can represent everything from virtual land parcels to artworks, to ownership licenses.
“They’re bought and sold on NFT marketplaces. While dedicated marketplaces such as OpenSea and Rarible have hitherto dominated the field, recently some of the leading cryptocurrency exchanges have begun to muscle in on the space. In June 2021, crypto exchange Binance launched its own NFT marketplace, while rival Coinbase announced its own plans for a NFT marketplace in October 2021, with over 1.4 million users signing up for the waitlist in the first 48 hours.”
Importantly, this meant that NFTs were linked to crypto-currencies. Bored Ape NFTs, for example, are sold via Ethereum. It has also suffered a major price drop from the peak, as the chart shows:
- At its November 2021 peak, it was traded at $4.7k
- But recently, it has been trading at less than half this amount
Unfortunately for those who bought into the hype, the promise seems to have been more exciting than the performance.
The ‘Bored Ape Yacht Club’ is a collection of 10k pictures minted on the Ethereum blockchain. At the September 2021 peak, one profile was bought for 740 ETH ($2.9m). And Sotheby’s sold 101 Apes for $24.4m.
Part of the marketing hype was that a buyer was joining an “exclusive society”, where celebrities would hang out together. Owners would be also be given free gifts of other NFTs, which they could then keep or sell.
Yuga Labs, who developed the Bored Apes concept, seem to have done very well:
- Building on the Bored Apes success, they also launched Mutant Apes in August 2021 for 3 ETH each
- All 10k sold within an hour for a value at the time of $96m
- And Yuga themselves reached a peak valuation of $4bn in 2022:
The rise and fall of NFTs and the Bored Apes tells a wider story about the euphoria that has driven US markets since the pandemic began.
As the SocGen chart shows, just 10 stocks have been responsible for a double-digit rise in the S&P 500 in 2023. The other 490 stocks are either lower or unchanged. As Bloomberg note:
“Ten stocks alone accounting for a double-figure rise in the S&P 500 in just six months is quite another. Generally, by definition, it’s hard for the biggest companies to grow that much. People know about them, and they’ve already grown a lot.
“There are plenty of analogies from the past for big speculative excitement about one sector; but it’s historically really, really weird that that excitement is focused in a few behemoth companies.”
One can understand a celebrity, with money to burn, buying an NFT to use as an avatar. But it’s surely also “really, really weird” that billions of dollars were being traded in NFTs at the peak of the mania.
One wonders what will happen when reality starts to hit the 10 vastly over-priced FAANMG+ stocks that held up the S&P 500 in H1.