Why digital art and sports collectibles are so popular so suddenly

The cryptocurrency world is abuzz with talk of digital collectibles, unique virtual tokens that can represent anything from art to sports memorabilia.

People have been paying hundreds of thousands of dollars for these NFTs, or non-fungible tokens. One investor, Sheldon Corey of Montreal, Canada, told CNBC that he paid $ 20,000 for one of thousands of computer-generated avatars called CryptoPunks.

CryptoPunks is nothing new – it was released by developer Larva Labs in 2017. But it has recently become very popular, generating $ 45.2 million in sales volume in the seven days gone exclusively according to the NonFungible website, and promoting wider crypto art. “move.

CryptoKitties, one of the original NFTs, generated $ 433,454 in sales last week, according to NonFungible. The digital cats, developed by a start-up business called Dapper Labs, were so popular that they set up the network of digital money ether.

NBA Top Shot, a platform created by Dapper Labs in partnership with the basketball league, has attracted $ 147.8 million in sales in the past seven days, according to data administrator NFT CryptoSlam. The service allows users to buy and sell short clips showing key games from major basketball players.

The larger move for these tokens comes as bitcoin and other cryptocurrencies have accumulated significantly in recent months, and at a time when people are spending more of their time indoors due to restrictions. coronavirus.

NFTs are non-fungible tokens – meaning you couldn’t exchange one NFT for another – that run on a blockchain network, a digital ledger that records all transactions of cryptocurrencies as bitcoin.

The difference with bitcoin and other tokens, however, is that all NFTs are unique and non-reproducible. Each collects value independently. Crypto investors say NFTs get their value from their scarcity. They are stored in digital wallets as collectibles. Beyond arts and sports, people have also found uses for NFTs in real buildings and games.

Nadya Ivanova, chief operating officer of research firm BNP Paribas affiliated with L’Atelier, says collectible digital assets can be thought of as a better version of an MP3 file. Musicians have been struggling to make a profit from their work in the digital age, and Ivanova says some are turning to NFTs to secure ownership of their work and an additional source of income. to seek.

“It allows content creators to have the property rights to what they create, allowing them to make a profit from it in a variety of ways that they can’t do with corporate art,” she told CNBC. states that crypto art is the strongest growing segment of the digital collectibles market.

The total value of NFT transactions rose threefold to $ 250 million last year, according to a study by NonFungible and L’Atelier. The number of digital wallets traded almost doubled to over 222,179, while some traders were able to make profits of more than $ 100,000.

“We are seeing a new generation of traders within the NFT market; digitally indigenous people looking for digital indigenous asset classes outside of established asset markets,” Ivanova said. “These are people who have amassed fame and fortune and want to invest in virtual assets just like NFTs.”

Ivanova says the NFT market has been maturing. Famous Auction Christie’s auction sells NFT-based artwork created by Beeple, a renowned digital artist who has created videos and graphics for celebrities such as Ariana Grande and Justin Bieber.

The NBA Top Shot video trailer by LeBron James was recently sold for $ 208,000 higher. But sales can be volatile – NBA Top Shot and CryptoPunk trades have fallen in the past 24 hours, according to NFT data finder CryptoSlam.

The rise in prices of these significant items has led to fears that speculative crypto mania will be repeated. Some investors are reminded that the first coins, or ICOs, were offered in 2017, when multiple startups issued new digital tokens to raise money. Almost none of the ICO projects exist today, and some even misled investors out of millions of dollars.

There are some things like the ICO frenzy – for example, celebrities like Lindsay Lohan and Mark Cuban have recently sold NFTs.

“We had a very similar moment in 2017,” Billy Rennekamp, ​​a blockchain entrepreneur, told CNBC. “Every gallery was commenting on NFT. Every blue artist was commenting on it. But there was too much risk when the market collapsed and it was a shame to be involved in NFTs when prices fell. “

“I wouldn’t be surprised if we go through another whole bull market and a bear market,” Rennekamp said.

However, the companies behind these signals do not think that it is long.

“NFTs are here to stay,” Caty Tedman, head of partnerships at Dapper Labs, which led the NBA Top Shot project, told CNBC. “Streaming will be the blockchain to enable consumer mass capture. The future is now.”

NBA Top Shot now has more than 100,000 active collectors and has raised $ 215 million in sales to date, Tedman said. He is working on a digital collectibles game based on the UFC mixed martial arts league and has also drawn the support of Warner Music to develop NFTs for music fans.

“The billions spent on Fortnite skin highlight the importance of our lives and personalities online, and their value to people,” Matt Hall, co-founder of Larva Labs, told CNBC .

“What NFTs offer is just a formalization of digital property, and a way for that property to last longer than the life of one company, game or platform.”

Hall said Larva Labs will not take any fees from its market users – although it does pay blockchain processing fees. “We are CryptoPunk owners just like everyone else,” he said. “So as the overall market rises, the ones we have will get more valuable as well.”

The cheapest “punk” available on CryptoPunks is currently worth $ 36,000, Hall said. Larva is working on a CryptoPunk agent, Hall added, without explaining the company’s plans.