Peter Wood, the CEO of up-and-coming UK exchange CoinBurp, believes NFTs are caught in a bubble that will eventually pop. However, Wood says that much like cryptocurrencies consolidated through crypto winter to emerge stronger, so will NFTs after the pop.
Signs of Digital Art NFTs Cooling
Following the record-breaking $69.3mn sale of Beeple’s The First 5000 Days last month, the man himself warned that digital art NFTs are a bubble.
“I absolutely think it’s a bubble, to be quite honest. I go back to the analogy of the beginning of the internet. There was a bubble. And the bubble burst.”
Last week, nonfungible.com released data showing a cooling of interest in the segment. The average daily volume of NFTs sold across marketplaces had fallen from $19.3mn to as low as $3mn on March 25.
Although the figures lack sufficient data points to draw any firm conclusions at this point, those who jumped in headfirst are left wondering if this is a short-term lull or whether the top is in.
Wood isn’t too concerned with the situation, citing boom and bust cycles as natural phenomena of all financial markets. He added that when the bubble does burst, the NFT space will regroup and emerge stronger off the back of infrastructure being built today.
“When it does [burst], and it will eventually because every financial market has this decline, what’s actually left behind will be a ton of more investment, like our company, who are building specifically for NFTs. The products don’t completely flourish over three to six months. We’re building the infrastructure now.”
This he likened to crypto winter following Bitcoin’s $20k peak in 2017. While some crypto firms closed their doors for good, others restructured and kept building. Those that stayed the course are reaping the benefits now, which is what he sees happening for firms such as CoinBurp post-bubble.
Oversupply is an Issue
Wood admitted that overinflated prices for NFTs result from “hit and runners” out for a quick profit, which is especially problematic at present.
“Although I do feel that it is being inflated by these guys who are trying to get into the space and trying to make a quick buck.”
However, another factor to this is oversupply. James Surowiecki, Business Columnist at The New Yorker, used several examples of oversupply tanking prices. From cod to Marvel comics, to baseball cards, and so on. In every instance, a glut of supply led to the end of the boom in those respective markets.
What’s unsettling for NFTs advocates is the lack of restriction on issuance. Surowiecki said anyone could mint an NFT if they choose to, adding unlike comic books, they don’t deteriorate.
“With NFTs, the risk of oversupply is especially acute, because there is no one in charge, and the barriers to issuance are so extraordinarily low — you can literally create a new NFT in a matter of minutes. And, unlike comic books or baseball cards, NFTs don’t fall apart or get discarded.”
The million-dollar question is, when will the NFT bubble burst?