Crypto assets: The ‘unreal economy’ is thriving27 Feb 2021 17:47
£57,000 for a virtual flower. £71,000 for a digital basketball card. £1m for real estate in a video game. It's not just bitcoin. People are investing thousands in a whole range of digital assets with even more dubious value.
From tweets to digital artworks, exclusive ownership of online content is now being sold through the same blockchain technology that underpins cryptocurrencies. Collectively referred to within crypto communities as non-fungible tokens, these pixelated assets are drawing record demand just as the price of bitcoin soars to new highs. The most successful NFT traders are apparently making profits of almost $500,000 (£355,293) in a single year, with some individual portfolios now worth in excess of $1m.
According to data provider NonFungible.com, the market has seen sales of more than $304m since mid-2017. But after remaining relatively stable for years, the amount of money flowing in has rocketed in recent weeks. In the year to date, $150m-worth of NFTs have been sold, almost 2,500 per cent more than during the same period last year.
“It’s just crazy, the past few months,” says Dan Kelly, chief executive of NonFungible.com. “It has just exploded. There’s a lot of mainstream appeal coming in now.”
Like bitcoin, the popularity of NFTs has been boosted by endorsements from celebrities and high-profile institutions. This week, Christie’s will become the first major auction house to sell a digital artwork on the blockchain. Earlier this month, a 13-second video clip of basketball star Zion Williamson sold for $100,000; the man who bought the video – one of hundreds created by the NBA as a sort of virtual trading card – told ESPN it could eventually increase tenfold in value. That’s despite the clip also being free for anyone to watch on YouTube.
This boom in digital assets will only add to the sense that markets are growing increasingly detached from the real economy, which has been suffering the full impact of the Covid crisis. Over the past year, demand for tangible assets like oil has fallen to new lows, consumer spending has stagnated, and redundancies have reached record highs as the pandemic lays waste to businesses. Rental incomes have dropped as offices and high streets shut down, while previously lucrative residential markets around the world are also facing a drought in sales as the crisis prompts an exodus from large cities.
The virtual real estate market, on the other hand, has never been livelier. Earlier this month, cryptocurrency news site Decrypt reported that the most expensive NFT ever had been sold: nine plots of digital land on Axie Infinity, a blockchain-based game where players rent out property to each other. The virtual estate reportedly changed hands for 888 ether (a cryptocurrency), then equivalent to $1.5m.
“We're witnessing a historic moment,” the anonymous buyer wrote on Twitter (US:TWTR). There are rising “digital nations with their own systems of clearly delineated, irrevocable prope
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