FOMO emotions flood into NFTs, repeating the collapse of animal coins?

On August 23, payment giant Visa announced it spent $150,000 to acquire CryptoPunk #7610, further driving the NFT craze.

Within 24 hours of this news breaking, CryptoPunks saw a surge in trading, with 200 buyers purchasing 288 pixel NFT avatars at an average transaction price of $254,000, with several avatars selling for over 200 ETH. On August 24, the "floor price" for CryptoPunks NFTs reached 74.5 ETH, more than doubling from 33 ETH at the beginning of the month.

Another project that has been hotly speculated is "EtherRock." On August 23, EtherRock #27, one of the 100 "rock images," sold for 250 ETH, setting a record for the highest transaction in the series. Moreover, various imitation projects modeled after EtherRock quickly emerged, with similarly styled paper NFTs and scissors NFTs being issued in the market, also selling for around 2 ETH.

Amidst the market speculation, OpenSea's trading volume has repeatedly hit new highs. On August 23, OpenSea's trading volume reached $194 million, a significant increase of 55.2% from the previous day's $125 million.

It is worth noting that the current NFT market has formed a complete set of speculation tactics. Due to the lack of depth in the NFT market and the absence of short-selling mechanisms, many seasoned players have observed that capital often targets popular rare NFTs for bulk purchases, subsequently raising prices for resale, with speculative demand surpassing the demand for collection itself.

Despite this, the NFT craze continues to rise, with the wealth effect sparking more interest among people. Many investors are experiencing FOMO (fear of missing out), trying to chase the wave. The similar frenzy evokes memories of the animal coin crash earlier this year in the second quarter.

As various types of NFTs reach sky-high prices, some industry insiders believe that the price deviations caused by speculation make NFT trading akin to a game of hot potato, and entering the market at this time may result in unfortunate consequences for those who end up with the last token.

Visa's Entry Boosts NFT Speculation

The NFT speculation frenzy has swept through the entire crypto asset circle, with prices of various NFTs skyrocketing over the past few months, continuously stimulating the senses of onlookers.

On August 23, payment giant Visa announced its entry into the NFT business, pushing this wave to a peak. Visa chose to enter the NFT space through the recently popular CryptoPunks—a pixel avatar NFT series. Visa announced that it purchased CryptoPunk #7610 for around $150,000 last week, which is one of the 10,000 24x24 pixel avatars, a typical female NFT avatar.

Cuy Sheffield, head of Visa's crypto division, stated that CryptoPunks pioneered NFT technology and the NFT business wave, and therefore Visa wants to own a Punk. More importantly, Sheffield believes that NFTs will play a significant role in the future of retail, social media, entertainment, and commerce, "We want to empower buyers and sellers and help partners get involved."

Based on the current market conditions for CryptoPunks, Visa's purchase price for the Punk is considered "cheap." Right after the company announced its acquisition of CryptoPunk #7610, the prices of many pixel avatars quickly rose. According to NFT data statistics site Cryptoslam, on August 24, CryptoPunk #2426 sold for 275 ETH, approximately $918,000, while Punks numbered 5874, 8779, 7144, 1271, and 7209 also sold for over 200 ETH on the same day.

CryptoPunks consecutively sold for over 200 ETH

As of 3 PM on August 24, CryptoPunks achieved a transaction volume of $73.2 million within 24 hours, a staggering increase of 1370.6% compared to the previous 24 hours, with 200 buyers purchasing 288 avatars at an average transaction price of $254,000.

According to data from the CryptoPunks official website, the current lowest priced Punk is listed at 74.5 ETH, approximately $249,800. On August 2, the lowest priced Punk was only selling for 33 ETH.

The fact that individual pixel avatar NFTs are selling for over a million dollars is astonishing, and this is just one of the crazy reflections of the NFT market.

Recently, another hot project in the NFT market is EtherRock, a set of NFT collectibles themed around "rocks," launched in December 2017, limited to 100 pieces, each rock having the same shape but slightly different colors, inspired by the classic Pet Rock toy that became popular in late 1975. Aside from being tradable, it has no other utility.

Yet, this simple "JPG rock" has skyrocketed in value. Previously, Tron founder Justin Sun purchased EtherRock #87 for 187 ETH. On August 23, EtherRock #27 sold for 250 ETH, setting the highest sales record for all NFTs in the series.

As various themed NFTs are being speculated upon, imitators have quickly emerged. On the NFT trading platform OpenSea, some have issued "paper" NFTs referencing the rock NFTs, and others have subsequently issued "scissors" NFTs, based on the logic that paper can cover rocks, and scissors can cut paper. Even these imitations have a significant market, with their NFTs selling for around 2 ETH, equivalent to tens of thousands of RMB.

The continuous price surge of NFTs has ignited the speculative desires of onlookers, with a large number of investors diving in due to FOMO. According to Dune Analytics, on August 23, OpenSea's trading volume reached $194 million, a 55.2% increase from the previous day's $125 million, with transaction volumes exceeding $100 million for three consecutive days, continuously breaking records.

Frenzied Emotions Bring Rising Bubbles

Today, almost everyone in the crypto circle is talking about NFTs, with even major internet companies like Tencent and Alibaba entering the NFT business, attracting more attention from outsiders.

As the creation, issuance, and free trading of NFTs form a mature process, the tactics of NFT speculation have also quietly gained popularity.

On August 24, the NFT project Meebits experienced a "buyout," with its trading volume increasing nearly 500% within 24 hours, and the lowest price rising from 2.7 ETH to 3.5 ETH.

The Meebits project includes 20,000 unique 3D voxel characters created based on a custom generation algorithm. It is a sibling product to CryptoPunks, both created and issued by Larva Labs. As CryptoPunks were being speculated upon, some had already set their sights on Meebits.

Meebits 3D voxel character NFT

As the NFT craze swells, many investors have observed that there is a potential force manipulating the market in the free trading NFT space, continuously raising the prices of certain NFTs and then selling them at high points.

"It's not just CryptoPunks and Meebits; the recently popular Parallel Alpha has also been subject to buyouts." A seasoned NFT player told Hive Finance that the price of the most common card NFTs in Parallel Alpha has increased tenfold from 0.02 ETH at the beginning of the month, with the current "floor price" reaching 0.2 ETH.

Parallel Alpha is a card game based on a sci-fi story, with numerous cards categorized into common, rare, legendary, and other levels, often with higher-level cards having fewer issuances and being rarer, thus commanding higher prices. The aforementioned seasoned player revealed that when a certain rare card is listed at a certain price, someone will buy in bulk and then list it at a higher price, driving up the market price. "This capital is clearly for speculation and profit, not genuine collection."

The frequent sale of various NFTs at sky-high prices indicates that the NFT speculation frenzy is gradually reaching its peak. Within various crypto communities, many have expressed the desire to at least buy one NFT. The wealth effect following the explosive speculation of NFTs is attracting more and more people to join the fray, and the seemingly outrageous transaction prices have become commonplace for investors.

This scene easily evokes memories of the frenzy surrounding various animal tokens in May of this year. People chasing various popular NFT projects is akin to how they pursued animal token trends back then, hoping for overnight wealth. Often, when emotions are at their peak, it signals that the bubble has reached its zenith; animal tokens crashed after just two weeks of speculation, and many tokens have now gone to zero.

According to Liu Changyong, a PhD in economics from Peking University and a senior scholar in the blockchain field, the current high auction prices for some NFT works undoubtedly indicate a bubble. On one hand, hot money and speculative sentiment have shifted from DeFi to NFTs; on the other hand, the NFT market lacks depth and has no short-selling mechanisms, making it easy for speculative sentiment to rise and for price manipulation through self-buying and selling, which could even become a tool for money laundering.

Liu Changyong believes that the NFT market is just emerging, and the issues surrounding the issuance, certification, management, valuation, and circulation of NFT assets have not yet been fully exposed. When a bear market arrives and the market cools down, these problems will gradually surface, and the bubble will burst quickly. However, he also stated that any new phenomenon in its early stages coexists with innovation, bubbles, opportunities, and chaos, and there is no need to overreact; managing risks is key.

The frenzied atmosphere in the NFT market has already alerted some seasoned players to the danger. Some believe that when speculative emotions exceed genuine demand, NFT trading resembles a game of hot potato, and as prices are driven higher and higher, anyone could end up with the last token.