A $1 Million Bored Ape Sale Tells Us Nothing About the NFT Market
Bored Ape Yacht Club NFT #232 sold for 800ETH. But in truth, the sales of BAYC NFTs or Cryptopunks tell us very little about the NFT market.
On “CT” (that’s Crypto Twitter to the uninitiated) there was a little bit of jubilation on the morning of November 23rd. As news broke that Bored Ape Yacht Club NFT #232 sold for 800ETH, just shy of $1 million at current prices, we were treated to countless tweets pointing to the folly of talking about bear markets, the “Crypto Winter”, or, indeed, that NFTs were dead. Few believe the latter statement, of course, but the sale of the Bored Ape was heralded by some as proof that the NFT market was still vibrant. Indeed, it was framed as the perfect riposte to a story posted earlier this year, namely that a Bored Ape purchased by Justin Bieber for $1.3 million was now valued at around $69,000.
But in truth, the sales of BAYC NFTs or Cryptopunks tell us very little about the NFT market. They are outliers in an industry that is built upon outliers. With or without the November 23rd BAYC sale (another similar fee was paid for BAYC NFT #8585 in early October), NFTs weren’t dead, or dying, or even on life support. It does seem, however, that it is a sector in transition, one looking to define itself and its goals going forward. The result of that transition might lead to a much more vibrant sector.
Interest in NFTs remains high
While overall sales of NFTs have been down, interest has remained strong. Moreover, we see more of a crossover from Web 2 to web3 due to platforms like Instagram and Reddit embracing digital collectibles. It’s no longer something accessible only to savvy blockchain devs. Any artist can learn how to make an NFT with the minimum of fuss – no coding experience necessary.
Of course, while Reddit and Instagram have been driving NFT adoption on Web 2 platforms, some would argue that it’s only the tip of the iceberg. Both Starbucks (Odyssey Rewards) and Nike (.Swoosh web3 platform) are examples of future NFT projects that could help drive mass adoption. In our opinion, these are much more important indicators of the market – or future markets – than the seven-figure sales of BAYC NFTs.
Indeed, the initiative by Starbucks, which will see it evolve its hugely successful Starbucks Rewards program to the web3 and NFT-based Starbucks Odyssey program, is perhaps one of the most important steps in the industry thus far. Why? Because it starts to bring us into what some proponents believe is the Holy Grail of NFTs – utility.
NFTs and utility combine to form a difficult subject. It’s the kind of topic that might lead you to trip over your words when trying to extol the virtues of NFTs to a relative over Thanksgiving dinner. But if we strip it back to what NFTs actually are beyond the clichéd idea of a J-Peg, we can say that they convey ownership of a digital asset and that ownership is then recorded on the underlying blockchain. To the uninitiated, that might not sound very impressive. But web3 enthusiasts believe that immutable record of ownership can touch every industry.
Use cases growing for NFT technology
Take, for example, some of the other important use cases for NFTs that have appeared this year. Homes have been sold as NFTs in the United States, with the tokens used to record the information on the blockchain ledger in the same way as attorneys would traditionally transfer ownership with deeds. NFTs and their use cases in real estate are in their nascence (very much so), but the hope is that they will soon make home buying quicker, more cost-effective, and less susceptible to fraud.
NFT home sales are certainly not alone in the logical use cases we have seen proposed this year. For instance, there is a suggestion that legal subpoenas could be signed, sealed, unsealed, and delivered in the form of NFT. We have also seen the proposal of NFTs to help with the privacy of healthcare records.
Of course, there is also the push for NFTs in gaming, which, for some, represents the most important narrative for the industry. While it has gone a lot further than some of the traditional industry use cases we highlighted above, we’d also still characterize that as a sector in its infancy. Sure, some might point to Axie Infinity and other titles as examples of the maturity of play-to-earn and NFT gaming, but there is still scope to do a lot more in the established gaming industry.
Perhaps all of this leans toward the following point: We are beginning to see the sectionalization of the NFT sector, and that will lead to disparate growth patterns among the different sections. Game-Fi, for example, might explode before we are out of the Crypto Winter, or we might see the mass adoption of NFTs for use cases in law and healthcare like those we have outlined above. As such, we won’t – and shouldn’t now – point to the sales of expensive NFT art as an indicator of the health of the industry.
Doing so provides about as much use as claiming the broader entertainment industry (movies, television, gaming) is in rude health because someone paid a record amount for a Spider-Man comic book. The NFT sector is evolving, and it will take time. But it should emerge from the Crypto Winter, a much more diverse sector than it was when it went in.