Are NFTs Dead?

Two years ago, NFTs were a multi-billion dollar industry. Digital art pieces were being sold for millions of dollars. In 2024, 95% of those NFTs will hold an absolute zero value. The speculative bubble finally popped, resulting in huge losses for people who took the bait. In the end, those who profited the most were those who got out early, as well as the trading platforms, which would sometimes charge ridiculously high fees after the sale as transaction fees.

Why were NFTs so popular in the first place?

NFTs first appeared in 2014 but only gained worldwide attention in early 2021. Around that time, a digital art piece titled Everydays: The First 5000 Days, created by Beeple, was sold for $69 million. The artwork consists of a collection of 5000 individual pieces created by Beeple daily for over 13 years. It was the most expensive NFT ever sold at the time and sparked major interest in that type of art distribution.
Everydays: The First 5000 Days
In just a year, NFT trading increased to $82 million in 2022 from $17 billion in 2021. This new trend swept the internet like a storm, and one of the reasons for that was celebrity promotions. Major stars like Eminem or Justin Bieber would show off their NFTs on Twitter, but the reason for that might be different than just admiration of digital art.
The TINA organization went on to write letters to the legal teams of celebrities involved in the crypto market, alleging that their purchases of NFTs were part of a paid marketing promotion intended to inflate the prices of the marketed collections. Those allegations might be true in the case of Justin Bieber, who was involved in an NFT collection called the Inbetweeners. Bieber would post several pictures promoting the NFT collection without ever disclosing that he was, in fact, in a paid partnership deal with the company. After the TINA intervention, Bieber deleted the post, and the company removed the information about his involvement in the project from their website.

Did NFTs ever possess genuine value?

Many artists and investors made millions on cryptographic digital art, but the value of NFTs, like any other cryptocurrency project, was purely speculative. That means if the hype for NFTs were to die, the monetary value of those projects would sink, which is exactly what happened in 2022, but that's only the tip of the iceberg. There are three more problems with NFTs, which lie in the technology powering those projects.
See, when you buy an NFT, you don't actually buy the artwork, but rather a link that points to a server where the artwork is stored. This means that the images themselves are not encoded on the blockchain, which exposes the tokens to link rot. Link rot, or link death, is a phenomenon in which, over time, a hyperlink might cease to point to its original targeted file due to that resource being relocated to a new address or removed entirely. What this means for NFT owners is that their expensive pixelated avatar might cease to exist at any time.
The second problem is the seller fees. First, you have to pay a fee to mint an NFT. Next, a seller fee, that is, if you ever get lucky enough to sell it in the first place. And then there is a fee for exchanging the cryptocurrency. There are stories out there of people actually losing money after selling an NFT for under $100, as the fees on average accounted for 100.5% of the price. A study conducted by Kimberly Parker found that more than 50% of all NFTs sold at the peak of the hype were sold for $200 or less. So the real winners weren't the NFT artists or buyers, but rather the middlemen who were executing the trades.
NFTs sales volumes 2021-2024
And there are the legal rights. Ownership of an NFT doesn't inherently convey legal and forcible intellectual property rights to the file. Buying an NFT doesn't make you the copyright holder for that asset, and it also doesn't prohibit the original creator from making more copies. So, the main argument for even buying an NFT is shattered, leaving it as nothing more than a status symbol. Seeing all this, it becomes pretty clear why NFTs were a speculative bubble doomed to eventually pop, which is exactly what happened in 2022.

Why did the NFT market collapse?

After the initial hype that started in 2021, the market became oversaturated. Everybody started minting NFTs while the demand for them was dropping every single day. As of 2023, 79% of all NFT collections remain unsold.
But that's only one of the reasons behind the crash. NFTs are dependent on cryptocurrencies, which were also facing major difficulties at that time. The third-largest crypto exchange platform, FTX, went bankrupt, causing panic and a steep decline in crypto prices, which affected the liquidity of the NFT market.
And so we arrive in 2024. The latest reports claim that 95% of all NFTs have absolutely zero value. Even after filtering out the least significant collections, the statistics aren't looking great either. 18% of those top collections are valued at $0, while 41% are valued between $5 and $100. Only 1% is still worth more than $6,000. Things are not looking too good for NFTs at the moment, but knowing how unpredictable the crypto market is, they might still make a comeback in the future. But until that happens, I will be sticking to my boring old JPEG profile picture.