NFTs. Did we know what they were? No. Did that stop us from buying them? No. Honestly, I’m not sure how much of our economy and financial markets would even function if people only bought things they understood. 

But NFTs stand out because of the wild ride they went on in the last few years. Non-fungible tokens — little works of art that could be bought on the blockchain, little pieces of property you can own in cyberspace — achieved fame and made many fortunes over the last couple years.

But this year, NFT prices fell off a cliff. Nearly all of the NFTs on the market today are reportedly worthless.

This marks quite the fall from grace for the NFT, which saw a meteoric rise starting in 2021. It’s estimated that 23 million people bought NFTs — and it wasn’t just about sales. NFTs were a cultural phenomenon: They popped up in Super Bowl ads, White House speeches and Saturday Night Live skits. The NFT of a pair of Nike sneakers sold for more than $130,000 — far more than the actual sneakers. NFT artists were suddenly making NFT inspired merch for Walmart, Hello Kitty and even Louis Vuitton.

“I definitely had FOMO,” said Claudia Hess, an art appraiser in San Francisco. She jumped into the NFT market a couple years ago after some artists she knew started producing them and NFT art sales started making headlines. But jumping in was not so easy.

“It was hell, let me tell you,” said Hess with a laugh. “It was so complicated. Setting up the wallet, buying cryptocurrency … I’m like, ‘Has there ever been a freaking harder way to buy art?’”

Almost definitely not. But a lot of people were doing it and a lot of freaking money was changing hands. 

In fact, Hess still remembers watching what she considers to be the NFT sale heard round the world: The Beeple sale. It was the sale of an NFT from artist Beeple by Christie’s auction house in March of 2021.

In a Christie’s recording, Beeple watches the bids come in and starts to shake his head in disbelief as the bids climb to $50 million, $55 million and finally settle at an eye-popping $69 million. “Oh my god! $69 million?” He shouts. “I think it probably means digital art is here to stay. I’m going to Disneyland!” 

Getting caught up in the NFT gold rush

After that, NFT sales took off. At one point, there were reportedly 12,000 NFT sales happening every day.

Kyle Heise, a tech worker in San Francisco, participated in a few hundred of those sales. Heise had been collecting NFTs for years and said it was never about money. They were social: An online group would issue some NFTs, sometimes around an event or a game, and people would buy them and use them as profile pictures on social media as a way of being part of that group or movement — kind of like buying a t-shirt for your favorite band (or a hoodie sweatshirt from your favorite radio show).

But after the Beeple sale, Heise said that speculators jumped in the market, the money got big, and everything changed. Heise got swept up too. He found himself spending more and more on NFTs and remembers one NFT he bought for $3,000.

“I’d never even bought a car that was worth that much money,” he says. The NFT in question: Pancake Squad #2145. What did it look like?

“I have no idea,” he said. (For the record, it’s a cartoon of a chubby purple  bunny in a little red cap). But Heise doesn’t remember because the picture wasn’t the point. The group that issued the NFT was up and coming, Heise liked the artist, and the NFT market was on fire.

“I was like, ‘This is going to go up in price,” he recalls. “I knew I could flip this NFT.”

And flip it he did. Heise flipped Pancake Squad #2145 for a healthy profit, nearly doubling his money. Deals like that helped the NFT market balloon to more than $25 billion last year. But almost as quickly as it rose, the NFT market crashed. And it wasn’t your typical downturn: The bottom quite literally fell out of the NFT market. 

“I still like them, but they lost their value … they’re worthless now,” Heise said.

A steep fall from grace

Heise traces the crash back to the nosedive cryptocurrency took last year. After several high-profile bankruptcies, the collapse of crypto exchange FTX, multiple scandals and the trial of Sam Bankman-Fried, cryptocurrency values tanked almost across the board.

The NFT market, an offshoot of crypto, took an even bigger fall. Kyle Heise estimates he lost around $5,000 on his NFT investments — and that he got off easy. Heise knows people who lost tens of thousands, even hundreds of thousands of dollars. Some investors lost their life savings. While the value of many cryptocurrencies has largely recovered, the NFT market has not.

Now, it seems, NFTs have entered their regulatory era: The Securities and Exchange Commission has been investigating several operations and recently settled with NFT issuer Impact Theory for $6 million. State regulators are also taking action against several firms, and many former big players are facing jail time. Right now, lawsuits of all stripes are hammering the NFT space.

“People just thought they could get away with anything … because it was crypto and because these were tokens,” said John Jasnoch, an attorney at Scott+Scott. He represents a group of investors who lost big on a collection of NFT’s known as the Bored Ape Yacht Club.

When NFTs have celebrity clout

These were cartoon drawings of apes wearing hats, gold chains, jackets and other accessories, but it wasn’t so much about the drawings themselves as much as who was buying the apes: Madonna, Gwyneth Paltrow, Steph Curry, Serena Williams, Jimmy Fallon, Snoop Dogg and Post Malone were all in the Bored Ape Yacht Club.

Justin Bieber dropped $1.3 million on an NFT of a forlorn looking ape wearing a black T-shirt. All of that money, publicity and star power made demand for Bored Ape NFTs go, well, ape.

“There were certain perks that would go to token holders,” explained Jasnoch. “There was admission to parties and events. It was really promoted as a way to rub elbows with the stars.”

Those elbows did not come cheap. One of Jasnoch’s clients paid $400,000 for one bored ape NFT. And now? “The value of those assets has just plummeted.”

Jasnoch points to Justin Bieber’s $1.3 million NFT, which as of this summer was worth around an estimated $60,000. And, relatively speaking, Bieber’s actually doing OK. Crypto marketing firm DappGambl estimates that 95% of NFT’s on the market are now worthless.

A (potential) new day for NFTs

So is this RIP for the NFT? Maybe not. 

There’s evidence the NFT market is starting to come back to life. Prices have stabilized, investment bank UBS just issued a pretty optimistic outlook for the tokens, and the NFT marketplace is still estimated to be worth about $10 billion. 

Art appraiser Claudia Hess said she thinks NFTs are here to stay. She points out that museums, including the SFMoMa and the Centre Pompidou have put NFTs in their permanent collections. Also, serious galleries like Pace continue to sell NFTs, and — most importantly — artists are still creating them.

“The market is continuing,” Hess said. “Maybe not at the same pace. It’s more about the work itself now and less about a get-rich-quick scheme.” Hess said she regularly gets asked to appraise NFTs and has even written a book on how to value the digital artworks.

NFT Collector Kyle Heise agrees. NFTs are getting back to their roots a bit, he said — more about community, less about profit. Still, he is hanging on to his investment NFTs.

“Maybe one day, I’ll wake up and I’ll have a $2,000 NFT in my wallet,” he said. “You can’t participate in the lottery if you don’t play, right?” 

After all, in a world where fuzzy bunnies and apes in t-shirts can go for millions, it would seem all bets are off.