reinmoeller_ROSLAN RAHMANAFP via Getty Images_nft ROSLAN RAHMANAFP via Getty Images

Why the NFT Market Will Collapse

Prices of non-fungible tokens remain high for now and may continue to increase for some time, but a crash will come. With central banks set to tighten monetary policy in an effort to rein in inflation, new and untested asset classes are likely to be punished harder than more reliable ones.

LAUSANNE – In March 2021, the auction house Christie’s sold a JPEG file created by the artist Beeple for $69.3 million, a record for a digital artwork. The ownership of the “original” JPEG – entitled “Everydays: The First 5000 Days” – was secured as a non-fungible token, or NFT.

The sale made headlines, and NFTs have since become red-hot. Investors poured $27 billion into the market in 2021, and Meta, Facebook’s renamed parent company, now reportedly plans to allow users to create and sell NFTs. There’s just one problem: the NFT market will eventually collapse, for any of a host of reasons.

In essence, an NFT is a tradeable code attached to metadata, such as an image. A secure network of computers records the sale on a digital ledger (a blockchain), giving the buyer proof of both authenticity and ownership.