After the first family conversation on NFT ended with an open question, today everyone is anxious to get back together at the dinner table because they have something other than foods in mind.
Greg: So did anyone want to share the thoughts on Lily’s question of why some NFT products having a shocking price tag?
Kimberly: Well, I think the key is to remember the NFT market is not just a buyers’ market, but also a new market. We have never seen such a market before because the whole blockchain technology was simply not there.
Joy: Excellent point! That definitely has something to do with the skyrocketing prices that Lily was talking about. What people do in a brand new market? They speculate because nobody knows exactly where the market is heading even in the short future.
Greg: I agree. This always happens: When we do not have solid facts to back up our thinking one way or the other, we use our imaginations to fill out the gap left by weak or scanty evidence.
Lily: But I still don’t understand how speculation pushes up the price of some but not all NFTs.
Kimberly: Well, in a buyer’s market only buyers have power, the sellers are left to suffer from low price. But in a new market both sellers and buyers are allowed to speculate, and both can shape the market through speculations, making the game fair and more interesting.
Greg: What Kimberly is saying is that although the NFT sellers lost the traditional monopoly power of scarcity like Picasso had, they gain the power of speculation in a time of high uncertainty.
Lily: I understand that part. But why only some but not all NFTs receive astonishing price?
Emily: I think I have an answer. In a way the NFT market is like the California Gold Rush that we learned in history class. Everyone had high hopes, and everyone was trying to get rich quickly.
Greg: Interesting comparison. The Gold Rush showed us how powerful speculations was. Let’s be honest, without the Gold Rush there won’t be 300,000 people moved from all over the world to California; without the Gold Rush the city of San Francisco and the state of California would not have been born so early.
Joy: That’s true. Never overlook the power of speculations because changes made by speculations are just as real as those driven by full facts.
Kimberly: One important lesson from the Gold Rush — the one that helps answer Lily’s question: Only a few people ended up getting rich from the Gold Rush, most earned little more than they had started with. Remember the Charlie Chaplin movie “The Gold Rush?”
Lily: Oh yeah, a great movie! So this NFT market is like the Gold Rush Déjà vu all over again.
Greg: Well, yes and no. NFTs are way more sophisticated than digging gold in the old days. For example, all gold miners were competing with each other to find gold, not to create anything that nature did not directly provide. NFT market is full of creators and creativities.
Joy: The gold miners also only needed to find gold and never worried about finding buyers, because everyone wanted to buy gold once the miners found it.
Kimberly: We also did not hear stories like how the miners coordinated to form any brand. Basically zero branding power from miners.
Emily: Yeah, the gold buyers were not much better. They just sit there waiting for the miners to come to them. Today the NFT buyers are highly developed but also highly divided. Some are willing to pay big ticket price for items that others couldn’t care less.
Lily: So you are saying it is the divided buyers who pushed up the price of some but not all NFT items.
Emily: I think so. The article from the Washington Post I was talking about yesterday described how a few NFT marketers like “Bored Apes” and “CryptoPunks” managed to win big from selling NFT collectables.
Kimberly: I have a feeling that the current NFT market emerges more by design than by random events.
Emily: You are right on that. According to the article, the cryptocurrency and blockchain community wanted to use NFTs to help them gain market traction and acceptance. “They want to create a sensation, to whip up publicity for NFTs in particular and cryptocurrencies in general.”
Lily: No kidding. Nothing else is more powerful than the headline news that some people became overnight rich from NFTs.
Emily: A good example is this NFT artist named Mike Winkelmann, who called himself Beeple, flew to the art fair in Miami in private jet — this is the same guy whose entire wardrobe used to be worth about $600, and by the time he landed in the airport, his bank account received $56 million from the record sale at Christie’s. It’s like a jackpot.
Lily: Cases like that add fuel to more speculation.
Emily: It sure did. Let me quote the Washington Post article again: After the “Beeple sale” on March 11, 2021, the total NFT sales reached $12 billion by early December last year, up from $546 million in the first half of 2021.
Joy: In the worst case scenario we may even see “winner takes all,” when a few winners can charge any high prices they want while the rest receive almost nothing.
Greg: We have had a wonderful conversation so far, but we may want to go deeper than talking about a newspaper article. I believe we can learn a lot from the industrial insiders. I came upon this wonderful blog last night that I have not finished reading yet. It had an interesting title of “The Non-Fungible Token Bible: Everything you need to know about NFT,” published in January 2020 by this guy named Devin Finzer, the co-founder of OpenSea, the largest NFT marketplace in the world. How about we all read that blog and come back to talk more tomorrow? I can send the link of that blog to your phone if you are interested.
Everyone except Jason and Cleo agrees to read the blog and that is the end of the second family conversation on NFT.