Can Supply of NFTs Outweigh Demand
Full article by Rachel Wolfson found here.
Key Points:
Nonfungible tokens (NFTs) have taken the cryptocurrency space by storm in the year 2021.
Mounting interest in the digital collectibles have broken several trading volume records in August, with several sales of individual NFTs surpassing more than $1 million dollars each.
While NFT trading volume has declined in the first half of September, high end projects such as CryptoPunks and EtherRocks still see high price sales. These projects were some of the first NFTs created on the Ethereum blockchain in 2017.
Experts in the field claim that the scarcity/limited amount of those NFT sets bolster its value as the demand far exceeds supply. The chief marketing officer of Reserve.org, a stablecoin project, has said that “EtherRocks in particular will continue to rise in value due to the fact that only 100 were created. Punks, Rocks, and Kittens are all classic 2017 art of Ethereum crypto. However, there are thousands of kittens and punks and only 100 rocks.”
While highly desired NFTs may have certain characteristics that arguably support its valuation, a wave of new NFTs continue to flood the cryptocurrency market everyday.
Jason Lau, COO of crypto exchange Okcoin, has stated that “NFTs can ultimately be created by anyone with internet access, but a much smaller population is interested in owning them. Eventually supply will outweigh demand. This is very much like any other creator-based economy. For NFTs, we are still in an early stage and a lot of exploration is being done by both creators and owners. How we reach an equilibrium remains to be seen.”
It can be difficult to determine which NFTs are worth the high prices asked for them. NFTs are also tied to cryptocurrency markets and suffer from the same market volatility.
