Cryptocurrencies are crashing, and some fear NFTs could be next

PARIS (AFP)  – A slew of celebrity endorsements helped inflate a multibillion-dollar bubble around digital tokens over the past year, but cryptocurrencies are crashing and some fear non-fungible tokens (NFTs) could be next.

NFTs are tokens linked to digital images, “collectable” items, avatars in games or property, and objects in the burgeoning virtual world of the metaverse.

The likes of Paris Hilton, Gwyneth Paltrow and Serena Williams have boasted about owning NFTs, and many under-30s have been enticed to gamble for the chance of making a quick profit.

But the whole sector is suffering a rout at the moment, with all the major cryptocurrencies slumping in value, and the signs for NFTs are mixed at best.

The number of NFTs traded in the first quarter of this year slumped by almost 50 per cent compared with the previous quarter, according to analysis firm NonFungible.

It reckoned the market was digesting the vast amount of NFTs created last year, with the resale market just getting off the ground.

Monitoring firm CryptoSlam reported a dramatic tail-off this month, with just US$31 million (S$42.5 million) spent on art and collectables in the week to May 15, the lowest figure all year.

A symbol of the struggle is the forlorn attempt to resell an NFT of Twitter founder Jack Dorsey’s first tweet.

Mr Dorsey managed to sell the NFT for almost US$3 million last year, but the new owner cannot find anyone willing to pay more than US$20,000.

Ms Molly White, a prominent critic of the crypto sphere, told Agence France-Presse that there were many possible reasons for the downturn. “It could be a general decrease in hype, it could be fear of scams after so many high-profile ones, or it could be people tightening their belts,” she said.

The industry’s reputation has been hammered for much of the year.

The main exchange, OpenSea, admitted in January that more than 80 per cent of the NFTs created with its free tool were fraudulent – many of them copies of other NFTs or famous artworks reproduced without permission.

“There’s a bit of everything on OpenSea,” said Mr Olivier Lerner, co-author of the book NFT Mine d’Or (NFT Gold Mine).

“It’s a huge site and it’s not curated, so you really have no idea what you’re buying.”