Meltwater's Zubair Timol on the future of art and NFTs, Long Read

NFTs have been an increasingly hot topic over the course of the last year with everybody from crypto enthusiasts to art collectors learning about these non-fungible tokens. For those of you who aren’t yet familiar with this phenomenon - these NFTs are digital assets that can be traded online via cryptocurrencies and are just like other property types, though bearing no tangible form. In other words, they are images, songs, gifs, which have exclusive ownership that can be proven by the blockchain - and some of them are worth a lot of money by anybody’s definition.

Why? Because the non-fungibility factor means that these digital assets are unique and can’t be replicated - at least, using this underlying technology - which serves as a ledger to prove their origin and every movement from the time of creation to various changes of ownership. And, if there’s one thing we know about the art world, it’s that consumers love exclusivity.

NFT and the art market 

The unique metadata and identification codes encoded in them enable buyers to use NFTs as a store of value. So much so, that they have led to the burgeoning of a digital artwork marketplace that was virtually non-existent a little over a year ago.

In fact, it was in the first quarter of 2021 when interest in NFTs first peaked, while daily trading on the top NFT marketplace, OpenSea, reached $323 million in August alone—similar to the amount traded in the whole of 2020.

NFT’s have made the leap into mainstream, as investors seek to widen their traditional investment portfolio. The NFT boom has been built by a thriving ecosystem, accelerated skill set development and the increased confidence in digital assets.

Social media response to NFTs

Meltwater, tracked and analysed news and social media data from January 1, 2021 to October 25, 2021 to highlight the trends and other predictive data-points for this growth.

With over 13.1 million total mentions across platforms, it has undoubtedly become the most talked about in the market at the moment in terms of generated interest.

           Global Heat Map for Online Mentions on Non-fungible tokens

             between 1 January and 26 October 2021


                                           Global Trend on Non-fungible tokens

                                        between 1 January and 26 October 2021

Even as we are now in a crypto winter of sorts, it’s still apparent that public interest in NFTs has begun to rise once again, as celebrities and sportspeople are increasingly participating in NFT markets. However, since they are inherently tied to cryptocurrencies it means they are still subject to volatile price movements.

The popularisation of NFTs

One of the most talked-about NFTs ever to be sold was the Nyan Cat animation, created in 2011, which became an internet phenomenon. The piece was sold for 300ETH (or over $500,000) in February 2021 and is currently valued at over $1,000,000. Let that sink in for a minute.

Shortly afterward, digital artwork by an artist known as Beeple was sold for a staggering $69 million - making it the most expensive NFT sold to date. It became popular because it’s a collage of the artist’s first 5,000 daily created images since 2007 giving it an additional layer of novelty. And now, Beeple is regarded among the top three most valuable living artists, according to the auctioneers of that sale.

In August 2021, clipart of a rock was sold for 400ETH (approximately $1.3 million) as one of the 100 digital rocks developed by EtherRock. The company’s NFTs are some of the oldest on the market, having been around since 2017. Their popularity and value are based on their scarcity but, somewhat ironically, all 100 have already been sold.

Sports personalities are also joining in on the hype, with footballer Lionel Messi ensuring NFT payments were included as part of his compensation package at his new club Paris Saint-Germain. Boxer Oleksandr Usyk launched a collection of NFTs shortly after beating Anthony Joshua in September 2021.

The crossover with mainstream sports, has only sought to increase demand and awareness for entertainment related collections. With some NFTs unlocking adding additional owner benefits and community engagement such as the recently launched Ludo Labs.

On Twitter 2.16 million unique authors talked about NFTs. Even teens have jumped onto the NFT bandwagon and they’re doing it through the creative power of social media. The most popular of these is a transgender 18-year old known as FEWOCiOUS or Fewo for short. He makes art based on his gender identity struggles and has sold that art for over $2 million through the same auctioneers as Beeple.

                                         Global Twitter Trend on Non-fungible tokens

                                            between 1 January and 26 October 2021

Top NFT Entities

Some of the top keywords that the data found included:

  • NFT
  • Ethereum
  • Bitcoin
  • Beeple
  • Crypto

All hype and nothing more?

When it comes to whether NFTs will be here for the long haul, the jury is still out. One school of thought remains quietly optimistic that NFT values will continue to increase over time, while another believes it can’t last.

Much like cryptocurrencies, the future of NFTs is uncertain. They haven’t been around long enough to expertly analyse their performance based on different market factors that affect other financial products.

The all-time highs of August 2021 have begun to wane as some analysts believe that the bubble has burst, while some see it as an “NFT winter” much like its crypto counterparts are facing. Indeed much of this drop is possibly due to the fact that there aren’t a high number of high-value NFTs on the market currently.

Flooding the market: Supply and demand is still a factor

With artists and creators seeing NFTs as a potential, viable revenue stream, hundreds of NFTs are flooding the market as each artist claims that theirs are rare and unique, thus valuable.

Supply may eventually outgrow demand leading to a loss in value of less popular NFTs, and a continued increase in the more sought-after ones, much like the values of traditional art.

Bespoke platforms, offering curated products such as Jumy NFT, will continue to develop the marketplace, as collectors and investors alike seek to refine their experience.

What can we learn from this?

  • Blockchain applications extend far beyond cryptocurrency. The value of blockchain technology lies in its potential for new applications rather than simply supporting crypto trading, and businesses that explore these opportunities could have an immediate advantage.
  • The fundamentals of supply and demand still ring true and overproduction of NFTs may hamper their perceived value. However, in the same way that music producers operate in a flooded but competitive market, so NFTs may grow in value, selectively.
  • Traditional value principles still pertain to digital applications. While the format may have changed, the fundamentals remain the same. The most sought-after NFTs have novelty, exclusivity or talent behind their success and worth.

As we continue to move into an era of digitisation, the world over, businesses must adapt to survive and understand the growing implications and importance of blockchain technology in all of its applications. NFTs may be a fad but if the ebbs and flows of cryptocurrencies have taught us anything, it’s that we are still operating in a volatile space, which means higher risk but potentially higher reward.

 Zubair Timol, is EMEA vice president, Meltwater