Exploring the Root of NFT Value: How Long Can the Hot Crypto Art Trend Last?

If you don't understand the underlying value logic of NFTs, you won't be able to comprehend OpenSea's ever-increasing trading volumes, nor why Beeple's NFT sold for $69 million, nor why the floor price of Crypto Punks reached as high as 129 ETH. So, what underpins the value attributes of NFTs? Which crypto artworks currently represent undervalued opportunities? And what investment risks should we avoid? On the evening of September 2nd at 7 PM, the OKX Intelligence Unit invited Shorts Howard, a North American NFT art collector, and aow, founder of Wall Ash, to explore the roots of NFT value together.

Why Can a Single Image Be Worth a Fortune?

Recently, the NFT collectibles sector has remained red-hot, with various NFT works repeatedly fetching astronomical prices. As of September 8th, the total trading volume of Bored Ape Kennel Club (BAYC) reached $484,751,992, while Crypto Punks has already hit $1,155,184,853. An increasing number of young people and large institutions are flooding into this market, making NFTs undoubtedly the hottest trend right now — leaving outsiders wondering: why are these NFT works based on JPG images or pixel-generated art worth a fortune?

Recent Performance of Top NFT Projects Source: opensea 2021.9.8

For NFT participants, no one simply views it as just a JPG image.

aow believes that an NFT is a piece of history, because it is recorded on the blockchain with a timestamp, representing what happened on the blockchain or the internet at that time — it carries milestone significance, and only NFT works possess such value. Early NFTs like Crypto Punks and Ether Rock hold even greater historical significance. Therefore, many people in the NFT space have always been dedicated to "archaeological" work, uncovering NFT projects that were issued in 2017 but never appeared in the public eye — much like people in the real world collecting Song Dynasty coins or Ming Dynasty stone tablets.

Additionally, he pointed out that the trend toward comprehensive digitization of human society is unstoppable, and NFTs are merely one step in the process of bringing assets on-chain. It is a widely adopted application on the blockchain — a digital asset that everyone can understand — easier to grasp than the various tokens and coins out there, which is why more people participate, even attracting individuals from completely outside the crypto space. More people means higher prices naturally follow.

Furthermore,for many people, NFTs serve as a membership pass to a community, or a symbol of digital citizenship. Just as you need a WeChat account to communicate with others via WeChat, in NFT communities, owning certain NFTs is required to be accepted by the community and to feel a sense of belonging within it.

Of course, there are also many crypto wealthy individuals whose NFT purchases are mixed with desires to show off wealth and status — comparable to wealthy people in the real world buying luxury cars and prestigious watches. Some old-money wealthy individuals who want to quickly enter this space find that purchasing an expensive NFT serves as advertising, the fastest and most effective way to announce their arrival.

Is the Current NFT Market Boom Merely a Bubble?

Many people today dismiss NFT crypto art as nonsense, hastily concluding it is a bubble. aow believes this is entirely normal — when everyone can understand NFTs, there will be no investment opportunity left in this space. However, one must recognize that those who entered earliest also bore the greatest risk. Therefore, aow believes the smarter approach is to analyze the success logic of these emerging things and the trends they reflect.

He believes that a bubble certainly exists, but for quality projects, the presence of a bubble will not have too significant a negative impact. aow noted that against the backdrop of currency oversupply, it has become difficult to find any field without bubbles. However, some bubbles leave nothing behind after they burst, while others burst only to grow back stronger. aow believes Bitcoin and NFTs both fall into the latter category.

Shorts Howard shares the same view as aow, reminding us that the NFT market is enormous — digital collectibles, gaming, and more are just a few segments of this market, so one cannot make blanket judgments about the entire space; specific analysis is needed. Some projects surge wildly, doubling hundreds of times within a few short months, but perhaps 99% of them cannot preserve their value — these projects may offer short-term returns but should not be held long-term. There is definitely bubble presence in this segment, but that remaining 1% has long-term value.

How to View the Current Market Trend?

aow has observed recent shifts in market hotspots. PFP NFTs and NFTs with social value have always been the hottest, but recently, the focus has shifted — generative art and other works with genuine artistic value are gaining increasing attention in the market. It can be said that the primary form of NFTs will shift from static images toward interactive, more complex directions. Additionally, some projects with more intricate mechanics are also drawing attention, such as Loot, which went viral in recent days. Loot's explosive popularity revealed the paradigm shift currently underway in the market:the flow of funds is evolving from the "buy blindly" or "follow the herd" stage to a stage where investors need to more deeply understand the deeper meaning behind projects.

OpenSea's trading volume has repeatedly hit record highs recently, and major companies like Visa and Budweiser have joined the ranks of Punks buyers. Curry recently changed his Twitter avatar to the BAYC ape he purchased for $180,000. As things stand, the brand effect of major companies and celebrities has brought massive attention and traffic to NFTs, further introducing them to more people in a very intuitive way.

Curry's BAYC Ape Avatar

Furthermore, leading studios like Larva Labs have packaged and sold the IPs of their famous Punks, Meebits, and other NFT projects to Hollywood. These NFTs can subsequently be adapted into films and continuously expand into various commercialization pathways. aow believes that NFT-related commercialization operations will only continue to increase, because NFTs are an excellent tool for copyright confirmation and naturally have the土壤 for commercialization. There is a vast amount of IP in the real world, and these IPs also want to enter the virtual world and preemptively occupy this future massive market. Therefore, the bridging role of NFTs will bring them rich application scenarios — this is also an excellent way for blockchain to achieve real-world commercial adoption.

How to Screen NFT Projects?

Shorts Howard divided the NFT market into three segments. The first segment is Collectibles — the most common form is PFP NFTs, which are relatively straightforward. The second segment is Generative Art, a product of the fusion of computer technology and art. Its creation is not directly authored by humans but rather generated through algorithms. The algorithm has a set of rules within which it can freely create, ultimately producing unique works and, to a certain extent, representing the artist's philosophical concepts. Some NFT generative artworks are like blind boxes — buyers don't know what they'll receive until the trade is complete. The third segment is "1/1 Art," where each piece is completely unique. The current trend shows that progressing from the first to the third segment, these can respectively represent several stages in the evolution of NFT art — the higher the artistic value, the more scrutiny required for investment.

Shorts Howard further proposed five criteria for evaluating NFT collectible value. Considering the most popular NFT collectibles recently, they basically conform to this logic.

1,Scarcity. The more copies of a particular work in existence, the lower its value.

2,Ownership. If the owner of an NFT merely hodls (firmly holds long-term) and doesn't readily trade their collection, this also affects the NFT's value. For example, Pak's Cube work — many people hold large quantities long-term while whales continue buying, causing Cube's price to surge ceaselessly.

3,Influence. By observing what other works the seller of an NFT holds or has sold, people can roughly judge whether this person has sound investment judgment — this influences their assessment of the NFT being sold.

4,Hype. When a particular work goes viral, it attracts investors flooding in frantically, fearing being left behind — such herd behavior further drives up the NFT's price.

5,Fungibility. Digital artist Pak launched the NFT burn platform burn.art, where burning NFTs earns ASH tokens. Through this method, NFTs (non-fungible tokens) become FTs (fungible tokens). Using ASH tokens can purchase other artworks by Pak, forming an independently operating economic model. Additionally, an increasing number of artists influenced by Pak have adopted this model, so the ecosystem continues to grow and improve.

How to Avoid Market Risks?

Currently, most investors participating in the NFT boom are those with substantial capital, while smaller investors have largely not yet entered the market. aow believes that in the future, the barrier to NFT participation should lower further, attracting more ordinary people. In his view, the NFT space is highly promising — NFTs and crypto assets, like everything else, represent an unstoppable trend that will inevitably be accepted by more and more people. In the short term, the market is indeed quite frenzied, some people's behavior is irrational, and there are also many speculators and scams. Therefore, one must recognize that every investment in NFTs carries significant risk,advance research is essential — including understanding the creator, the history of the content, reviewing the contract — but most importantly, only buy what you love. After all, NFTs carry artistic attributes, requiring reliance on your own feelings and perspective, not purely speculative motives.

One point to note is that while the overall NFT market still has considerable upside, some niche segments currently suffer from excessive bubbles. For example, aow believes that PFP NFTs are currently overheated, with too many copycat projects mixed in, including fraudulent scams — so careful discernment and extreme caution are absolutely necessary.

aow believes that at its core, NFTs carry artistic attributes, so NFT investment cannot be entirely quantified and analyzed through rational methods — sometimes the inexplicable resonance between the investor and the work also matters. Of course, there are some universally applicable rules: for instance, one can select works or projects that represent new trends for investment; or invest in larger projects, which at minimum ensures they won't go to zero; if seeking outsized returns, one can participate in as many cheaper projects as possible — if two or three out of a hundred invested projects skyrocket, this can balance safety and returns.

For aow personally, he leans toward investing in natively digital artworks, especially authentic artworks from reliable artists that exist on-chain — works that can interact with smart contracts, not just real-world scans uploaded to the chain. He believes that after the market cools, only on-chain native, evolving artworks will have long-term vitality. Another category is projects that can co-build communities and inspire community member creativity — like Loot, which has been trending recently. This project can be seen as a metaverse萌芽 for ordinary people. In short, imaginative projects all hold value; the era of purely hype-driven concepts has passed.

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