“You should think of NFTs being at the level of maturity of crypto at around 2012 to 2013,” said punk6529 when asked if NFTs are a speculative bubble.
Speaking at the recent TOKEN2049 conference held on 28–29 September, the pseudonymous CryptoPunk NFT owner and fund manager gave his opinion on the current state of the NFT market, and along with fellow pseudonymous NFT collector WhaleShark, discussed their outlook for the industry.
Citing the development of the metaverse and the rapid digitalisation of the world economy, punk6529 said that there will be a need to represent things that are “more than fungible tokens.”
“What we have with NFTs is a platform for the representation of arbitrary non-fungible digital auctions – art, collectables, brands, and metaverse assets,” he explained.
According to data from Dune Analytics, the weekly trading volume of NFTs has plunged to US$114.4 million representing a decrease of 98% from the US$6.2 billion witnessed around the end of January. Weekly NFT trading volume peaked at US$146.3 billion in early April, declining sharply in tandem with the start of the crypto market crash in May.
While punk6529 acknowledged the decline in NFT trading and volume, he believes that in the next 10 to 15 years, potential buyers of digital art will be able to purchase them as a token from a decentralised platform or database, and will not be willing to buy NFTs from centralised entities like Facebook.
“The price of any particular NFT collection today is for me irrelevant. But the idea that this [NFTs] wont matter in the next decade is absurd,” he emphasised.
Read more: Admit It, NFTs Are Ugly and Expensive
For WhaleShark, the NFT boom and subsequent decline was because capital from “larger crypto environments” like DeFi were flowing into the NFT market in search of quick profits.
“A lot of people said that because non-fungible tokens are non-fungible, they should be immune to the ups and downs to the larger markets”, he said.
“When you actually a demographic of money that is predominantly looking for short term gains and ‘punk’, naturally the leading indicator for NFT prices today are actually based on the prices of the crypto market”, he added.
While WhaleShark believes that the “high-end” NFTs have the potential to buck the crypto correlation trend and become a “safe haven for capital”, he also noted that the industry is still relatively small, and there is still some time before that can happen.
“I think we’re quite far away from that…when you look at some of the most prominent projects, they have anywhere from between 6,000 to 10,000 holders so the price and financial action is limited to a very small market,” he said.
NFT PFPs: Boom or bust?
PFP (profile picture) NFTs have dominated the current cycle, but doubts remain over their long-term sustainability, and whether they can remain as the main NFT asset class within the next five years
Describing PFPs as the “most fungible of non-fungible tokens” and BAYC (Bored Ape Yacht Club) holders as “puppets of Hollywood”, WhaleShark said that there are more important NFT asset classes that can leverage the technology, without specifying what are they.
However, Punk 6529 highlighted that PFPs actually make NFTs more accessible to the masses, because it’s easier to comprehend and “more straightforward than looking at thousands of generative art pieces.”
“My view is that someday everyone is going to have a PFP. WhaleShark is not a believer in PFPs but he’s effectively wearing a PFP in this call. Maybe it’s not an NFT, maybe it does not have value, but he has an avatar”, he pointed out.
“In a decade when this conference is going to be in augmented reality, my guess is half the audience is going to have an avatar… PFPs are going to be useful”, he added.
Onboarding the masses
For punk6529, the industry needs to improve on usability and security to onboard more users.
“We have a massive amount of work on education but also the industry providers do not take user safety seriously,” he said.
“You can still be permissionless and self-sovereign, but you can still use tools to prevent people from making mistakes…if we don’t fix that we can’t onboard large amounts of people”, he added.
While WhaleShark concurred with punk6529, he also noted that NFTs are currently “for the rich,” as alluded to previously when he mentioned that prominent projects only have a few holders.
“We need to move beyond the crypto bros and ‘brolettes’ and really have an onboarding process to allow everybody including your grandmother to hold an NFT safely,” he concluded.