The economics behind NFTs – why celebrities such as Justin Bieber, Gwyneth Paltrow and Eminem pour millions into Bored Apes
- Non-fungible tokens offer tamper-proof ownership of digital items and virtual artworks, and they have the art world divided
- Some decry them as a passing trend with inflated value, while others are too busy making money from them to have much to say
Mention NFTs and people get all defensive. Self-proclaimed evangelists of non-fungible tokens say “it’s a generational thing”, meaning anyone who is shocked by the millions spent on cartoon images of an ape is simply old.
Sceptics of NFTs are devastatingly dismissive too. When they say “how can this possibly be art?”, what they really mean is that the collectors of Bored Apes, Cryptopunks and other digital images sold in cryptocurrencies have warped values, make crass speculative bets and, worst of all, have terrible taste. Meanwhile, the market keeps getting bigger and more outlandish.
In the past month alone, Hong Kong has seen NFT launches by a feng shui master, a DJ, a Bored Ape-derived fantasy football club and a virtual human who will “make” a work of art. Meanwhile, Hong Kong celebrities are joining the likes of Snoop Dogg and Paris Hilton in setting up their own universes in the metaverse – virtual worlds where their fans can buy NFTs of virtual concert tickets, virtual outfits and virtually everything else.
The bears became more convinced that NFTs will go the way of tulips in the 17th century and South Sea Company stock in the 18th century when cryptocurrencies suffered a spectacular crash recently (Ethereum, the cryptocurrency favoured by NFT creators, lost half its value against the US dollar between November and January).
The names of the NFTs seem to invite ridicule. Are collectors zombies who ape the actions of others out of sheer pandemic-induced boredom?
Yet values of the most expensive NFTs in dollar terms have held up. So if one Bored Ape was sold for 40 Eth (US$128,000) three months ago, it’s probably going for at least 80 Eth today to make up for the loss in value of Ethereums.
