The party is over for crypto bros this week, as the digital assets took a huge hit across the board. The collapse of currencies like Bitcoin, which reached an 18-month low, and the ensuing impact on crypto platforms such as Coinbase, which laid off 18% of its workforce (some 1,100 people) — citing what CEO Brian Armstrong called a coming “crypto winter” — appears to have compromised the value of everyone’s favorite electronic Beanie Babies: non-fungible tokens (NFTs).
Just as those manic speculators of the 1990s found that their six-figure investments in Beanie Babies were not actually sustainable, popular NFT collections, including the celebrity-darling Bored Ape Yacht Club (BAYC), are taking a hit along with the crypto slump. Bloomberg reports that BAYC NFTs saw a 25% decrease in average price, citing data from DappRadar and CoinMarketCap, reducing the value of tokens that sold for as much as millions in recent months. Other so-called “blue-chip” NFTs like the CryptoPunks have also seen dips in value in recent weeks. And while these peaks and valleys have encouraged some investors to purchase these tokens while they’re relatively more affordable, overall, sales volume for the top NFTs has decreased in the past month, reports say.
Bloomberg also cites the NFT Index (NFTI), which tracks the performance of NFTs based on each token’s circulating supply, noting that it fell 23% over 24 hours.
Market professionals point to unexpectedly intense inflation, which hit a 40-year high at the end of last week, as the source of the crash, but Microsoft founder Bill Gates had another theory, which he shared at a TechCrunch talk this week.
Referring to “expensive digital images of monkeys” as “100% based on greater fool theory,” Gates drove home the point that assets like NFTs are entirely contingent on a consumer market that believes they have value. Unlike, say, a house, which retains the intrinsic value of being a place to live, no matter what extrinsic value is conferred upon it by demand in the real estate market, an electronically unique picture of a cartoon monkey does nothing for you, unless everyone believes it is a desirable object. Hard to believe, but there you have it.
In some ways, NFTs are no more or less arbitrary than the art market writ large, where the value of certain artists and their output is radically skewed according to trends, tastes, and the whims of people with more money than sense. As they say, there’s a fool born every minute — so greater fool theory is not the worst basis for an investment strategy. But crypto enthusiasts might do well to temper their enthusiasm and keep some of that banal real-world currency on hand for a rainy day, because apparently, winter is coming.