NFT art, which was all the rage two years ago, proved one of the worst investments in history, with sales plummeting 99%.
Non-fungible token (NFT) art refers to a digital artwork, typically a picture, that a person has tokenised and stored on the blockchain.
There is no physical copy of the artwork. NFT art’s uniqueness is captured in its token rather than the artwork itself, which can be copied and distributed.
The first NFT art was created in 2014 by Kevin McCoy and Anil Dash during a hackathon. Their aim was to give artists ownership over a piece of original digital art.
NFT art started to gain traction in 2017 when Matt Hall and John Watkinson created CryptoPunks – punk-rock-looking pixelated avatars with an NFT for each character.
Although they gave these CryptoPunk NFTs away for free, the digital artworks started to sell in an aftermarket and reached $170,000 by the end of the year.
Many digital artists realised there was a market for NFT art and created a slew of artworks to satisfy the growing demand.
The NFT market exploded. It peaked in 2021, with monthly NFT art sales reaching $881 million in September of that year.
There were many examples of people paying incredible amounts of money for very simple digital pictures.
An NFT of an artwork called The Pixel by artist Pak sold for $1.96 million. The artwork is a single grey pixel – that’s it.
In December 2021, another piece by Pak, The Merge, became the most expensive NFT ever by fetching $91.8 million.
One of the original CryptoPunks, 5822, also reached the all-time expensive list by selling for $23 million in February 2022.
Many people warned that it was a bubble, reminiscent of the tulip mania craze 400 years earlier, where people paid up to five times the cost of a house for some tulips.
It was not long before the bubble burst. NFT art sales plummeted to $22 million in September 2022 and $11 million a year later.
This equates to a 99% decline in sales over two years, which shows how much momentum the global NFT market lost.
The global NFT art market has also witnessed a huge decline in the number of active buyers and sellers. The number of unique buyers plunged by 84% year-on-year.
There are numerous stories of people who have lost large amounts of money by investing in NFT art during the peak.
Crypto entrepreneur Sina Estavi bought Twitter founder Jack Dorsey’s first tweet for $2.9 million in March 2021. A year later, the highest bid for this NFT was $277.
In October 2021, a collector bought a pixel art CryptToadz avatar for $1.05 million. Eight months later, he sold it for $8,300 – a $1.02 million loss.
Decline in NFT art sales
The chart below, courtesy of AltIndex, shows the rise and fall in the value of sales involving an NFT in the art segment worldwide.