Will the NFT art market ever recover? Bored Apes and CryptoPunks cashed in and crashed out when the crypto bubble burst – but there’s still a future for digital art tokens built on the blockchain

Apr 27 , 2024

One of 1,200 generative NFT artworks, launched in August 2023, based on Chinese artist Yue Minjun’s Laughing Man self-portraits. Photo: Handout

The non-fungible token (NFT) mania of 2021 was a phenomenon to behold. Dozens, if not hundreds, of celebrities were either pedalling NFT projects or creating their own. Savvy investors were making hundreds of millions of dollars, and it seemed like art – particularly digital art – was more lucrative than ever.

More importantly, the blockchain technology that allowed buyers to irrefutably own said artworks was set to revolutionise the art business. Artists could now sell their work directly in open marketplaces, and investors could buy and sell pieces instantly, without the need to travel to art galleries, work through an intermediary or find storage space for their collections.

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Buying, selling and investing in art was suddenly easier and more accessible than it had ever been.

$OPH, an NFT art installation by Sophia Hotung, on display at the Digital Art Fair in Hong Kong’s Central district, in October 2022. Photo: Yik Yeung-man

This phenomenon was supposed to thrive regardless of how well the cryptocurrency market was doing. After all, theoretically, if the price of the cryptocurrency used to buy an NFT dropped, it would mean you’d be buying the art at a discount.

The problem is that these technologies have been reappropriated by businessmen to, instead of helping the artist, squeeze them out of the game

Patrice Poujol, Lumiere Project

Instead, what we saw during the crypto crash of 2022 was that NFTs were hit even harder. Top NFT projects like “Bored Ape Yacht Club”, which during its peak had every piece selling for tens of thousands of US dollars, saw valuations drop by over 90 per cent. The crash led to speculation that NFT mania was never about the art at all, despite what a lot of Web3 enthusiasts wanted to believe. It was about the hype. So where did it all go wrong?

“Arthur Hayes [co-founder and former CEO of cryptocurrency exchange BitMex] wrote an article stating that during the crypto bubble, people didn’t make money on the implementation of projects: they made their big 100-times returns based on speculation,” said Dr Patrice Poujol, who launched a Web3 film company, the Lumiere Project, in 2019. “NFTs didn’t quite work because investors didn’t perceive the value that producers thought was there, and prices came crashing back down to Earth.”

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Poujol, who received the first-ever PhD in Hong Kong on Web3 and creative industries at City University of Hong Kong, is a big believer in Web3 technology and the potential of NFTs to create more vibrant ecosystems in all forms of art – from film and music, to digital art and paintings. However, he adds, implementation has been stifled by corporate greed and oversaturation.

Dr Patrice Poujol, founder of the Web3 film company the Lumiere Project. Photo: Handout

“The problem is that these technologies have been reappropriated by businessmen to, instead of helping the artist, squeeze them out of the game,” he explained. “If you look at NFTs, it started out really interestingly with artists like Beeple becoming massive successes, and we started to think, ‘Wow, this is going to allow artists to become millionaires.’ But what we saw within months, not even years, was that art became an auto-generated aesthetic that pushed the artist out of the project.”

The rise of NFTs coincided with the first editions of AI art, which allowed artists to create pieces within a matter of minutes. This led to the oversaturation of NFT marketplaces. Additionally, with the exception of a few creative artists like Beeple, the most successful NFT projects were those with appealing branding and prestige.

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An obvious example of this is the aforementioned “Bored Ape Yacht Club”. It mass-produced JPEGs of the exact same ape in different outfits and colour schemes. It’s hard to argue that these easily reproducible two-dimensional sprites became worth up to US$3.4 million by being at the absolute cutting edge of creative digital artistry.

“My question is – when it comes to Bored Apes, CryptoPunks and all the big projects that came out: how many artists came out of this besides a select few? The answer is: there’s hardly anyone,” Poujol said. “There should be an encyclopaedia of artists, but that’s not the case,” he added, noting that in many cases, the artists themselves were not well rewarded for their work, while the companies producing the NFTs were.

Yuga Labs held its first international ApeFest event, for fans of the “Bored Ape Yacht Club” NFT series at Hong Kong’s Kai Tak Cruise Terminal, in Kowloon, in November 2023. Photo: @BoredApeYC/X

“Grand promises that NFTs would put artists at the centre of the structured gain all disappeared,” he continued. “Apart from established artists, it was really difficult for emerging ones with no followers. It’s now a long shot, and what we saw with NFTs was actually a reappropriation of art for monetary purposes.”

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Poujol thinks that the increased sophistication of AI art has led to a digital-art NFT marketplace akin to a “Netflix on steroids”. With this level of oversaturation, it’s hard for an artist to stand out and find their own voice.

But with art becoming increasingly generic and uniform, Poujol thinks there is an opportunity for artists who make an effort to show the human element in their art.

He is still optimistic about NFTs and Web3 technology. In fact, they form a major part of Lumiere. For example, someone can purchase an NFT and use it to influence a decision in film production – say, over what type of shirt the lead actor wears in a certain scene.

Yuga Labs’ 10,000-strong “CryptoPunks” NFT series was generated by algorithm. Photo: Handout

“This is what you can sell as an NFT, and this is the potential it has as a technology for the art world – not just a picture of a random celebrity, or a JPEG of apes, but real access and real experiences,” said Poujol.

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In addition, the crypto crash got rid of a lot of the scammers and hype trains. What remains are real projects and real artists in it for the long-run. What’s more, as the market matures, there will hopefully be more deserving, hard-working artists who get the recognition and money they deserve.

The cryptocurrency market has seen an incredible rally over the past few months, with bitcoin hitting an all-time high of US$73,800 in mid-March. If another major crypto bull run begins, could we see a resurgence of NFTs? If so, what will the new marketplace look like? Will prices be less volatile? Will valuations be based more on artistic merit than hype and status?

The answers to these questions remain to be seen, and it will be interesting to find out over the coming months.

NFTs

After Beeple’s overnight success, Bored Ape, CryptoPunk and other once-hot art NFTs have tanked since the market’s boom in mid-2021 to mid-2022 – and while bitcoin has coming surging back this year, digital art tokens have not
‘Art became an auto-generated aesthetic that pushed the artist out of the project,’ notes the Lumiere Project’s Patrice Poujol, whose film company’s NFTs emphasise ‘real access and real experiences’