Let’s face it, that Bored Ape you paid an arm and a leg for in 2021? Well, to be more precise, it’s not looking so hot just yet. The technology behind the NFT space promised to shake up everything from art, media, and gaming to business ownership, intellectual property, and beyond. The question now isn’t whether the bubble has popped, but how spectacularly the crash will happen. And frankly it already has.

No Utility, Just Hype

Remember when every NFT project promised groundbreaking utility? Games you would want to play to earn, special access to IRL events, membership in prestigious clubs? How many of those promises actually materialized? Let's be real, damn few.

We got sold on the dream of NFTs being more than JPEGs. The reality is that most of these projects have failed spectacularly to deliver. They turned into little more than digital beanie babies powered by speculation and FOMO. We’ve talked to these developers since who have conceded they had no actual plan besides creating a buzz and cashing out. Artists were pushed to produce an infinite number of iterations of an individual character’s look. They sold out their artistic vision for the proverbial dollar.

Inspire the Kekalf effect, that weird retweet on Palantir, is a classic example. One tweet from an influencer makes NFT holders’ knees rattle in fear. That’s not a sustainable market. That’s a deck of cards propped up by good vibes.

It’s similar to when everyone was convinced tulip bulbs were going to be the next big speculative investment. Remember that? No? Well, it's the same damn thing. Except… tulips are beautiful—as things go—at least you can plant those.

DeFi Disaster Increased the Risk

The unification of NFTs with the Decentralized Finance (DeFi) realm was projected to open up a realm of potential. Instead, it exacerbated the risk and complexity, making the NFT space a financial wild west.

All at once, your digital art piece became an incredibly valuable asset. It turned into collateral for loans, a yield-generating asset, and a critical component of a sophisticated financial Rube Goldberg machine. Then what happens when the puzzle pieces begin to fall apart?

The answer is simple: liquidation, rug pulls, and massive losses. What began as the dream of decentralized finance soon became the nightmare of over-leveraged positions and unsustainable yields.

Think of it like this: you’ve got a beautiful painting, but instead of hanging it on your wall, you’re using it to secure a high-interest loan from a shady character down a dark alley. Which, ironically enough, makes that same painting even more at risk … and you as well.

Too Much Wall Street Influence

The initial allure of NFTs—as opposed to digital art sold in online galleries—was decentralization, putting artists and creators at arm’s length from the traditional financial system. What happened? Wall Street came knocking.

Perhaps the most nefarious sign at play is the growing tendency of the crypto market to track the performance of the stock market. Bitcoin mirroring the S&P 500. Now that’s really not decentralization, that’s Bitcoin going down the road of just being a pawn on the biggest chessboard.

The recent wave of institutional money, which temporarily bestowed a patina of legitimacy upon Bitcoin, has nevertheless watered down its original ethos. It's like when your favorite indie band signs with a major label – they might get more exposure, but they lose their soul.

The NFT space followed the same trajectory. What began as an explicitly anti-establishment rebellion was very quickly channeled into a new tool to concentrate wealth and facilitate speculation. That “quick flip” mentality fuels speculation and causes people to focus on floor prices. This unyielding drive for profit mirrors the greed and myopia endemic to legacy finance.

The NFT apocalypse may have arrived, but it’s not too late to learn from our blunders. Together, we can create a more sustainable, equitable, and responsible digital future.

  • Be wary of hype. If it sounds too good to be true, it probably is.
  • Focus on projects with genuine utility. Ask yourself: what real-world value does this NFT offer?
  • Understand the risks. Don't invest more than you can afford to lose.
  • Demand regulation. Call on lawmakers to protect consumers from the excesses of the NFT market.

NFTevening's opinions are not investment advice. Under no circumstances does this information constitute legal or investments advice—or an invitation for engagement in any form—by Investopolis. We participate in affiliate marketing.

Disclaimer: NFTevening's opinions are not investment advice. Always do your own research before making high-risk investments. We participate in affiliate marketing.