ALEX BRUMMER: In uncertain times stocks and shares, based on real companies, are considered risky – non-fungible tokens are beyond the pale
- The market love affair with crypto currencies is ending in a mess
- Crypto has many of the characteristics of the 17th century Dutch tulip mania
- Even more disturbing is the current obsession with non-fungible tokens
The market love affair with crypto currencies is ending in a mess. Having reached a peak price of close to $68,000 in November 2021, bitcoin is now worth around half that and the descent is gathering momentum.
A currency without any anchor, wrapped in mystery and consuming as much energy as generated by the Hoover Dam, was never going to be the transforming outgrowth of block chain.
Even big tech, in the shape of Meta Platforms, owner of Facebook, has decided that its great crypto experiment Diem, launched with the backing of Visa, Paypal and others, isn’t worth pursuing.
The future?: By using block chain, the tech behind bitcoin and other crypto, the owners of NFTs have an asset, with its own QR code which allows ownership to be fully verified
It is suggested that Mark Zuckerberg was unwilling to make new political enemies on Capitol Hill with a march on finance. But that hasn’t stopped him before.
Crypto has many of the characteristics of the 17th century Dutch tulip mania which ended in tears.
Even more disturbing is a child of crypto, the current obsession with non-fungible tokens (NFTs). In much the same way as bitcoin was adopted by some established financial players such as the Chicago Mercantile Exchange, NFTs have become a tradeable asset. It has been embraced by recently floated Auction Technology as well as the grand old houses of Christie’s and Sotheby’s. The enthusiasm of the auction rooms is based on the desire to embrace a new generation which lives alongside the avatars. If this cohort regards fine art NFTs as a good an investment to love and hold as the real thing, then the auctioneers are missing out on a fresh stream of income if they don’t get involved.
NFTs are no longer a minority interest. Earlier this week OpenSea, a block chain start-up specialising in NFTs, was valued at $13billion (£9.5billion) in a US fundraising.
Generally most images on the internet are free and easily replicated unless otherwise stated. By using block chain, the tech behind bitcoin and other crypto, the owners of NFTs have an asset, with its own QR code which allows ownership to be fully verified. As a long time philatelist and collector of illustrated Victorian books, I sort of understand why NFTs – created, branded, traded and stored on the web – might be deemed attractive to the hyper-tech generations.
But it is a struggle to understand how tokens, sometimes art works split into a thousand pieces, are ever going to compete with Rubens, Turner or Chagall.
After all, it is hard enough to establish bona fides of legitimate art, which has to be authenticated using keepers of the catalogue raisonne.
Imagine the difficulty of validating on the world wide web, the happy hunting ground for scoundrels and fraudsters. There are fashionable artists such as Banksy who delight in experimenting in new media and self-destructing work. They might regard fractional art and ownership as a great new space in which to work. But there is a risk that the more NFTs there are, and the more widely they are distributed, the less valuable they will become.
Even as interest rates start to rise, threatening the post financial crisis era of cheap money, more firms, artists and sporting figures are keying into the NFT space. This week luxury Italian car designers and makers Lamborghini accelerated into NFTs with the launch of a piece of art titled Space Time Memory.
The artwork consists of carbon fibre pieces sent to the International Space Station, each with their own QR code. These link into an installation by artist Fabian Oefner which ‘captures 1,500 individual parts of a real car’. A NFT work by the same artist last year netted £50.7m at auction. That makes it more valuable than the most expensive vintage car, the 1962 Ferrari 250 GTO.
Finally consider the activities of former England football captain John Terry. His Twitter account is promoting tokens which consist of cartoons of baby apes, some of which use images of Premier League, Europa League and Champions League trophies. The Premier League and Uefa are less than pleased.
Locating the dark space on the web where Terry’s authenticated tokens are stored could be difficult. Indeed, the whole legal framework governing NFTs is unknown.
Efforts to regulate bitcoin, let alone NFTs, are in their infancy. In uncertain times stocks and shares, based on real companies and heavily regulated, are considered risky assets not suitable for people moving towards retirement.
Non-fungible tokens are beyond the pale.