Investing is no different from playing the lottery?

NFTs (non-fungible tokens) are blockchain-based assets, tied to digital images, collectible items in the game or in the metaverse world. Thanks to the endorsements of many global celebrities, this asset class has exploded into a billion-dollar bubble over the past year.

Stars like Paris Hilton, Gwyneth Paltrow or Serena Williams have all boasted about owning NFTs. Even Messi launched his NFT collection last year. All of this attracts a segment of young people to join this emerging market in the hope of making a quick profit.

But the whole industry is slowly being shaken by the recent crash of the cryptocurrency market and the “terrible” drop in the prices of many major coins. At this point, the signs for the future of NFT are also not very positive.

The number of NFTs traded in the first quarter of this year fell by nearly 50% from the previous quarter, according to data from analytics firm Non-Fungible. They calculate that the market is still busy consuming the huge volume of NFTs created last year and reselling is taking off.

Monitoring firm CryptoSlam also reported a sharp drop this May, with just $31 million worth of art and collectibles traded last week, the lowest level in a whole year. An example of market gloom is the futile attempts to resell the NFT Twitter CEO Jack Dorsey’s first Tweet.

The CEO successfully sold the NFT for $3 million last year, but the new owner can’t find anyone willing to pay more than $20,000.

Scams are everywhere

Molly White, a software engineer and a strong critic of the crypto ecosystem, told AFP that there are many reasons for this market downturn.

She said: “The reason could be a general drop in fever (for virtual assets), it could also be due to the fear of being scammed after so many big cases, or simply people are tightening their belts.“.

This year, the industry’s overall reputation has also taken a hit. Major exchange OpenSea said in early January that 80% of NFTs generated from its free tool were scams – many of which were unauthorized copies of other NFTs or famous works of art.

According to Olivier Lerner, the author of a book on NFT, there is plenty of gold and silver on OpenSea. “The marketplace on that site is also unregulated, so you can’t tell what you’re buying” – he said.

According to CryptoSlam, an OpenSea competitor, the NFT LooksRare exchange, has a similar problem, as 95% of the transactions on the site are fake. This is because users will be rewarded with tokens every time they trade, so they buy and sell them themselves.

The amount of money evaporated because of NFT-related scams and frauds is also startling. Recently, the famous blockchain-based game Axie Infinity was stolen more than 600 million USD.

Like playing the lottery

According to attorney Eric Barbry, scammers are always associated with a newly developed technology. This is especially true when the NFT market does not yet have its own regulatory regime, leaving law enforcement agencies to rely on existing regulations.

Molly White argues that stronger sanctions could help reduce speculation in the NFT, but would also remove one of its main attractions – its ability to make quick profits. She said”I think it will be a good thing that the fever subsides. In its current form, NFT trading is extremely risky and perhaps unwise for the average person“.

The NFT is also often compared to the traditional art market because they have no practical value and values ​​fluctuate wildly based on trends and buyer craze.

But Olivier Lerner had other ideas. “It’s like the lottery. Just keep playing, but you’ll never win” – he told people looking for huge profits from the NFT.

Source: France24