Illusion of Scarcity: Why NFTs Are Neither a Good Investment Nor a Good Business

Key Takeaways:

• The true business model of NFTs is not about buying and selling scarcity and collectible value, but rather attracting a very small number of end buyers through misleading information—winning trust with high-priced NFTs and selling other NFTs at falsely assessed prices.
• In the past, individual "recognition prices" were often confused with the market's "consensus prices," but individual transaction prices are by no means "market consensus prices." In reality, the true buyers of NFTs are limited, and the market depth of NFTs determines that their pricing mechanism cannot be the "consensus pricing" that is generally believed.
• The issuance of NFTs has almost no barriers or costs, which makes the so-called "scarcity" of NFTs an illusion. Similar "scarce" NFTs are produced in bulk, making them not only non-scarce but even overly abundant.
• The market has long priced the false scarcity and substantial abundance of NFTs, and the hidden consensus of the market does not recognize the pricing of NFTs, resulting in NFTs having prices but no buyers.
• Most investors and issuing teams cannot make money from NFTs. Investors are unlikely to buy a lottery-like NFT that skyrockets in price; instead, they are more likely to become the "last buyer" of an incorrectly priced NFT (and may even be the only real buyer); most issuing teams merely mechanically inherit the product form of NFTs, failing to realize that only with strong financial backing and determination can they hope to create blue-chip NFTs like BAYC.
• The seemingly fair NFT trading market and data platforms are part of the sleight of hand, using absurd statistics to mislead investors and issuers into incorrect assessments and pricing.
• No longer fixating on the narratives of collection and scarcity, correcting misconceptions about the NFT market, and stopping the misallocation of resources are prerequisites for revitalizing the NFT sector.
• What this article discusses is both NFTs and more than just NFTs; there are still many illusions in the market waiting to be uncovered, and this article aims to spark further discussion.

There is a secret adage in the venture capital world: when everyone rushes to a particular investment sector, it is no longer a high-return track.

Profit-seeking behavior creates a balance—any obvious profit margin will quickly be snatched up, leaving the real excess profits hidden in places that are either overlooked or rare. (This is why I love opportunities that traders do not understand.)

While this is not an unbreakable doctrine, it often holds true in investment and business, which is why I have always been puzzled by the thriving NFT market two years ago:

If issuing NFTs is a business model so simple that almost anyone can profit from it, where does the exorbitant profit come from?

Since the profit path of NFTs has been understood by many overnight, and NFTs have almost sparked everyone's imagination of future business scenarios, how can it still be called a potential track?

Crowding and growth, low barriers and high returns can hardly coexist; if they appear simultaneously, one of them must be false.

Failing to see through this relationship inevitably leads to irrational profit-seeking and various disastrous decisions.

This article will strive to clarify why the reality of NFTs and NFT-like assets is mostly not as people perceive.

Two years later, the market's understanding of NFTs has not progressed much; there are still many teams pouring huge costs into a track based on erroneous assumptions. Even when the market was bleak, there were still teams tirelessly issuing new NFTs, hoping that their issued NFTs could squeeze into the blue-chip segment. As I began to write this article, there were still 30 projects waiting to be minted on CryptoSlam, not to mention the new NFTs emerging on the BTC chain, riding the wave of the Bitcoin ecosystem narrative. NFTs on the BTC chain

The profit-seeking mindset can inspire endless creativity, but more often leads people to follow trends and become lost in manipulation and deception. The free market allows people to make free choices, but it also allows people to freely create illusions and be deceived by them.

The importance of interpreting illusions lies in the fact that we will begin to learn to protect ourselves, and the market will stop allocating resources in the wrong direction.

Market Size of NFTs

Historically, NFT sector research reports love to mention the total market value of NFTs, describing it as a huge market, especially when it was an astronomical figure of $3 trillion two years ago (November 2021); at the same time, reports also delight in the incremental users it created for WEB3.0. As of the time of writing, the NFT market still has nearly 5 million unique users, with over 12.6 million cumulative buyers.

Perhaps due to the human tendency to cling to beliefs, people are eager to find supportive information for the potential of the NFT market, rather than trying to prove that the prosperity is unfounded.

Therefore, whether two years ago or today, with a market value shrunk by 99% to only $6.7 billion, almost no one questions the calculation method of NFT market value. NFT market data as of January 9, 2024

NFT Market Value = Floor Price (sometimes average price) * Total Supply; the total market value of NFTs is simply the sum of the market values of all NFTs.

This formula is unreasonable for general securities market valuation and even more absurd for the NFT market, being as ineffective as measuring each household's living standards by national GDP.

In general, the lower the circulating market value of a stock, the more likely it is to experience value bubbles and valuation deviations. The actual circulation of most NFT series is only 1%-2% of the total supply, and the circulation of non-blue-chip NFTs is even lower. Most importantly, as will be explained later, the prices of NFTs do not come from sufficient capital games, and their reflection of value is even poorer.

The ineffective high prices and the low circulation that no one cares about create a facade of wealth, and it is this mundane "accounting method" that leads market participants to overestimate the product value and market potential of NFTs, resulting in being deceived by false prosperity.

Ignoring the irrelevance of indicators and conclusions is one aspect; some obvious data that could disprove the prosperity of the NFT market is rarely mentioned. For example, as of November 28, the historical cumulative trading volume of NFTs was $86 billion—less than the total trading volume of Bitcoin on Binance over two months.

The stock market is filled with all kinds of fraudsters, with only trading volume being the sole exception.

The NFT market is far less significant than people imagine. When we reorganize all available data, we find that the only thing that can be called "huge" in this market is its bubble.

Measuring Liquidity: The Real Buyers in the NFT Market

I have been pondering what other indicators can effectively measure the scale and liquidity of the NFT market besides cumulative trading volume.

A scientist friend inspired me. He told me that he casually scraped the trading data of Cryptopunks, and after simple sorting, he found that the vast majority of punks had never been traded.

This discovery unveiled the liquidity dilemma of the NFT market, leading to a hypothesis: perhaps the reason for the lack of liquidity in the NFT market is that most NFTs do not have real buyers.

To verify this hypothesis, I scraped data from blue-chip NFTs outside of Cryptopunks, and some interesting statistics began to emerge. Next, I will take BAYC as an example to explain one by one.

As of November 28, 2023, Etherscan recorded a total of 36,990 trading histories of BAYC across 8 major NFT marketplaces. It should be noted that these are not all transfer histories of BAYC; the former is a subset of the latter. As of the editing date, the number of transactions has increased from 36,990 to 37,183

As shown in the figure, among the 10,000 BAYC in 36,990 transactions, 10% have never been traded even once, 71% of BAYC have fewer than 5 lifetime transactions, and fewer than 20 BAYC have been traded more than 30 times in the market, with only 4 having been traded more than 50 times, and none of the BAYC have transaction counts exceeding 100.

These data have undergone preliminary cross-verification.

I extracted 100 extreme values with more than 10 transactions and only 1 transaction, comparing their corresponding token IDs with the sales data recorded on Cryptoslam.

Cryptoslam also scraped data from other unnamed marketplaces besides the aforementioned 8 trading markets. When the trading history of a particular BAYC ID is limited to these 8 marketplaces, the data on both sides is consistent; the historical data of the 100 token samples with only 1 transaction is also consistent on both sides.

However, some discrepancies did appear, such as BAYC#5497. The number of transactions I scraped from the NFT Trade records on Etherscan is 21, while the number recorded on Cryptoslam is 54, of which 21 are trading data from Blur and OpenSea, and the additional 33 occurred in other trading markets not recorded by Etherscan.

For BAYC#4970, the historical trading count recorded on Cryptoslam is 17, while the number I scraped from Etherscan is 24.

In fact, the discrepancies are concentrated among those BAYC on the Cryptoslam activity leaderboard, with coverage almost at 100%. A little attention will reveal that the 24-hour, 7-day, and 30-day activity leaderboards are all the same batch of BAYC, with no changes in ranking; they are frequently traded on unnamed exchanges, resulting in the historical transaction counts displayed on Cryptoslam generally being higher than those recorded on Etherscan.

Regardless of what caused the surge in trading volume for this portion of BAYC, since we are measuring the long-term trading distribution of BAYC, such sudden extreme outliers should be excluded.

Therefore, this does not affect the conclusion—99% of BAYC have no market (no possibility of trading) because they do not have a certain scale of buyers.

Among the remaining 1%, if we consider one trade as the emergence of a new independent buyer, then there are only less than 30%—17 BAYC exist with more than 30 buyers.

In other words, over the past 950 days, these 17 BAYC each had fewer than 30 people willing to buy; among the 10,000 BAYC, only 1 had 60 historical buyers.

This data distribution also holds true for other blue-chip NFTs. The listing rate of BAYC on OpenSea is 2%

Some may ask, since 90% of BAYC have been traded at least once, how can we conclude that NFTs have no buyers?

In fact, just by looking at the listing rates of various NFT series on OpenSea, we can find clues. Almost all blue-chip NFTs with a supply of 10,000 have only 1%-2%—that is, 100-200 are listed for sale in the market.

If NFTs with trading records are genuinely sold, how can the listing rate be so low?

According to the scraped data, there are 1,729 BAYC with only one lifetime trading record. If these 1,729 BAYC were all purchased by independent real buyers, how could BAYC have only 200 listed for sale in the market—market participants have no reason to buy and then not sell, allowing funds to stagnate subjectively.

Now, I think everyone should thoroughly understand why the NFT market lacks liquidity.

Liquidity Lower Than Expected

We often talk about liquidity, and now it's time to give it a clear definition. I have observed that when people talk about the liquidity of NFTs, they often refer to both the liquidity of NFTs as assets and the available capital in this niche market.

Asset liquidity is the speed and ease with which an asset can be sold at a fair market value. Liquid assets can be quickly sold at current market prices without significant discounts and without incurring high transaction costs.

The available capital in the market refers to the abundance of funds in this market, which depends on the comparison between the amount of capital and the number of assets; it is the liquidity on the liability side.

The lack of liquidity in the NFT market is both an asset-side and a liability-side issue.

First, because NFT marketplaces have made the minting and issuance of NFTs extremely simple, the supply of NFT assets has grown like a virus, and the dramatic increase in circulating NFTs has created pressure on the liquidity of the entire market.

Second, the characteristics of non-fungible tokens mean that each NFT itself is a segmented market. Even for PFPs released as a series, each NFT in the series exists in its own unique trading environment, ultimately leading to a fragmentation of liquidity.

The nature of NFTs leads to fragmented liquidity, and the persistent lack of mechanisms to observe marginal changes in liquidity in the NFT market exacerbates the liquidity problem. In the FT market, once the marginal amount of funds in the market changes, the price of the FT will also change accordingly; both liquidity exits and liquidity increases in the FT market will inevitably be reflected in prices.

However, in the NFT market, the marginal amount of liquidity and price are isolated from each other; the withdrawal of available capital cannot be directly reflected in prices; even if there is no incremental capital in the market, the existing capital can still rotate to push up the prices of NFTs, thereby inflating the book market value of the entire NFT market.

When there are no mechanisms in the NFT market to measure or lock in existing capital, it leads to a false prosperity—despite the fact that liquidity in the market has dwindled, the book prices and total market value of NFTs can still remain high.

For NFT investors, the lack of buying/trading counterparts and the survivor bias creating a myth of sudden wealth ultimately results in them being lured into the market by high prices, only to become the "last buyer" instead of winning the lottery with NFTs.

The Fallacy of Consensus Pricing

So, can we trust the prices of NFTs?

Under past assertions, the prices of NFTs could be trusted because, from broad discussions, it seemed that both market participants and observers recognized the pricing mechanism of NFTs as "consensus pricing."

Consensus and scarcity are the explanations people find for the high prices of NFTs.

In my view, "consensus pricing" is a type of elegant yet vague expression that the crypto market has consistently favored; the widespread acceptance of such expressions is itself a typical irrationality of the crypto market.

Once we trace back the logical starting point of the "consensus pricing" viewpoint, we can easily discover that the true meaning of "consensus" here actually refers to indicators of notoriety and characteristics of group sentiment, which correspond to a hypothesis:

Hypothesis 1: If the issuer of the NFT is well-known and has many fans, the basis for consensus is naturally broad and solid, as celebrity fans will enthusiastically flock in, providing liquidity and turnover, thus giving NFTs appreciation potential.

Hypothesis 2: Different groups are seeking a sense of belonging and self-expression, and the group is willing to pay high prices for NFTs that satisfy their emotional needs.

This is not consensus pricing; it is notoriety pricing and sentiment pricing.

The notoriety hypothesis can easily be falsified by plummeting prices and real on-chain data—essentially, true market consensus.

Take Jaylen Bears as an example; it once seemed to be "hot" in the market, but in reality, its issuance ratio is lower than that of the high-priced BAYC and Punk (issuance ratio = issuance quantity / total transaction count; I use it to roughly measure the average turnover rate of a series of NFTs).

NFTs like mfer and azuki, which excel in "emotional value," have even higher issuance ratios (even surpassing BAYC and Cryptopunks); their "consensus" is more solid. I suspect this is related to user positioning; celebrity fans are not the audience for NFTs, and the number of fans of a celebrity within the NFT audience (especially those willing to spend money) is unlikely to exceed those who enjoy anime or shout "Hail the Bastards."

In other words, turning celebrity fans into NFT audiences and finding celebrity fans within the NFT audience is clearly more challenging than tapping into the emotional needs of NFT audiences.

However, even though sentiment can stimulate people's willingness to trade more than notoriety, the results still fall short of forming so-called "consensus."

As mentioned earlier, each NFT actually corresponds to a single segmented market; if 99% of NFTs have only one or two customers throughout their lifetime, or cannot even find a trading customer, who will make up their consensus? If an NFT has fewer than 30 historical customers, is the consensus of those 30 people really a consensus?

How can we find fair prices for thousands of personalized markets?

NFTs confuse individual "recognition prices" with market "consensus prices." In reality, the true buyers of NFTs are limited; among the NFTs that have been traded, 81% of NFT holders have fewer than 5 counterparties, including the self-buying and selling of market makers. The depth of NFT prices and turnover frequency determine that they cannot possess "consensus prices," and the pricing mechanism is not the "consensus pricing" that is generally believed, but rather speculative pricing by a limited number of investors.

But this is not the only reason why NFT prices are untrustworthy.

The Emperor's New Clothes: The Illusion of NFT Scarcity

Another factor used to price NFTs is scarcity, but once we understand the abundance of NFTs on the asset side, the narrative of NFT scarcity collapses.

The NFT business model was born around the narrative of scarcity; its essence is to sell scarcity at high prices—a crude application of the luxury goods business model.

I can roughly understand the source of this logic; some fragmented market theories from classical economics have dominated the thinking of NFT market participants.

While people do not fully agree that the invisible hand is the ideal way to organize economic activities, they do apply it one-sidedly in the NFT market.

We simply know how supply and demand determine prices; without considering elasticity, oversupply leads to price declines, while undersupply leads to price increases.

NFT issuers want the result of "price increases," so they artificially create "scarcity."

The first step is to shift concepts, claiming that the uniqueness of non-fungible tokens equals scarcity; furthermore, issuers will categorize attributes among a bunch of NFTs, making "scarcity" even "scarcer."

But the market's real demand for NFTs has clearly not been considered.

Prices are influenced by supply but determined by demand. People's demand for NFTs boils down to consumption demand and investment demand. Consumption demand emphasizes cost-effectiveness, and NFTs clearly cannot support high prices in terms of cost-effectiveness, leaving only investment demand. However, as NFTs can be continuously produced, they may have very low consumption value but do not possess the true scarcity (but are never short of market) that antique collectibles have in terms of investment value.

In the real art market, the prices of artworks also exhibit a Pareto distribution; the works of a few famous artists are worth a fortune, while most artists' works cannot sell for a price.

The peculiar thing about the market is that although the illusion of scarcity has been created, the market has not easily bought into it on a large scale.

Data results show that none of the 10,000 NFTs in various blue-chip series can be fully bought and sold (in reality, the market's willingness to trade the "most favored" 200 is also quite limited). Currently, there is no yardstick to measure the real demand for NFTs in the market, but the excessive supply of NFTs is an obvious fact; although the supply of NFTs in a series is limited, the total supply of NFT assets in the entire market is excessive. Number of newly issued NFTs from October 2023 to January 2024

And this precisely illustrates that the myth of exorbitant prices and trillion-dollar market value attracts more not "buyers," but issuers supplying NFTs.

However, judging by the fact that most NFTs remain obscure, it is clear that the vast majority of issuers do not understand what makes NFTs successful.

Who Inflated the Bubble

Due to limited real demand and liquidity, issuing, selling, or investing in NFTs is not a profitable endeavor, especially when the investment cost is high.

But how was it initially packaged as a trillion-dollar industry full of excess profits?

In 2021, I once outlined the history of the NFT market, discussing some nonsense about digital scarcity, cultural transformation, and expressions of crypto culture. In retrospect, the most important takeaway from writing that article was discovering that the reason NFTs became a business opportunity began with various crypto art markets actively facilitating sensational high-priced auction events in 2020 (especially Nifty Gateway and Async Art), culminating with Beeple, Pak, and Cryptopunks being showcased by Christie's and Sotheby's.

In other words, it was the crypto art market and traditional auction houses that progressively heightened the heat and pricing of the NFT market.

• In 2020, AsyncArt facilitated the auction of "First Supper" for $344,915 just two months after its launch, leading to the frequent occurrence of single transactions worth hundreds of thousands of dollars. Nifty Gateway held three curated auctions for Beeple from October to December 2020, with a total transaction value of 258 ETH (worth about $180,600 at the time).
• In December 2020, Pak became the first crypto artist to earn over $1 million.
• In March 2021, Beeple's "Everydays: The First 5,000 Days (2008-21)" was sold for a staggering $69.34 million, and Sotheby's announced it would hold an auction for Pak in April, marking its first step into the NFT space.
• But the most important event was in February 2021, when CryptoPunks 6965 was sold for 800 ETH (equivalent to $1.5 million), followed closely by CryptoPunks#7804, which sold for a price equivalent to $7.5 million on March 11. Consequently, on April 8, Christie's officially announced it would auction CryptoPunks at its 21st Century Evening Sale.

The emergence of PFPs and the rapid expansion of NFT asset scales began to unfold after this point.

• On April 23, 2021, BAYC launched its minting at a price of 0.08 ETH.
• On May 3, 2021, Meebits launched its minting.
• On July 1, 2021, Cool Cat launched.
• On July 28, 2021, World of Women launched.
• On September 9, 2021, CrypToadz launched.
• On October 17, 2021, Doodles opened minting.
• On December 12, 2021, CloneX launched.
• On January 12, 2022, Azuki launched.
• On March 31, 2022, Beanz launched.
• On April 16, 2022, Moonbirds launched.

The above are the issuance dates of the top ten blue-chip PFPs across the internet.

The myth crafted by the crypto art market and traditional auction houses around Cryptopunks inspired a group of gold miners in this market, who were the most sensitive to sniffing out opportunities and had the most experience in capital games—thus BAYC emerged.

"People create history from the conditions inherited from the past." — Marx

Bull markets always arrive this way—certain elements in random events are intentionally amplified, turning into narratives that spread by word of mouth and replicable products.

As the pioneer and founder of PFPs, Cryptopunks and BAYC essentially shaped the issuance framework for all subsequent NFTs—BAYC emulated the product structure of Cryptopunks, while other NFTs followed the (superficial) business model and promotional scenarios of BAYC.

The Magician's Sleight of Hand—Price Manipulation of NFTs

The founding team of BAYC was a masterful genius in the context of the NFT market at the time.

While most people were still confused about NFTs, the BAYC team had already planned how to use sleight of hand and people's cognitive flaws to turn BAYC into the next myth.

Returning to what we previously mentioned, only market makers have the motivation to control the listing rate of NFTs—control began at the time of minting.

I scraped 5,000 mint data of BAYC, and in this sample, which is close to half of the total, I found that 668 independent addresses participated in minting, with 1 address minting 16% of BAYC (800), and 46% of BAYC (2,311) concentrated in 20 addresses.

Moreover, over 87% of BAYC were minted in bulk via a single address (with a minting quantity greater than 4). Some BAYC mint records

At the time of its first sale, the number of minting participants was far less than 1,400. It is reasonable to suspect that minting was quietly completed within the team, and the collection of minting taxes set the first psychological line for BAYC prices, thus initiating its highly controlled operation.

The second step is to create a price myth.

From a trading perspective, the biggest difference between NFTs and FTs is that price manipulation of NFTs is simpler. NFTs do not need to undergo the process of price suppression and chip recovery; market makers can accurately avoid tokens not in their possession, allowing only the tokens they hold to become high-priced targets.

The nature and trading methods of NFTs determine that market makers can decide who to buy and who not to buy.

If we are participating in the FT or stock market, as long as we choose the right target, we will inevitably benefit from growth (whether from capital games or improvements in fundamentals), and even if no retail investors flood in, we can still find exit opportunities in the indiscriminate lifting by market makers.

But NFTs are not like that; for general investors, the only liquidity exit method is through other retail investors.

The brilliance of the BAYC team lies in creating "prices."

As we previously mentioned, FTs have indiscriminate prices; at the same time, the value of one FT equals that of another FT, and the price of FTs is the true "consensus price," determined by the real-time games between buyers and sellers, supported by transaction volume. In other words, "transactions" are what change prices.

But NFTs are not like this; the prices of the other 9,999 NFTs are determined by one high-priced NFT serving as a price anchor.

This is why they must create a price myth, and it is also why there are many instances of BAYC price gaps—initially sold on the market for hundreds of ETH, or first sold for only 3 ETH, and then suddenly increasing 139 times in the second transaction.

Why can price gaps never be a natural price increase?

Because those high-priced BAYC transactions were not listed on the market and almost never had auction records; the transaction records were all direct transactions.

Thinking from another angle, how can a BAYC that has never experienced market pricing suddenly be valued at over a million dollars overnight? NFT prices skyrocketing

The market makers and sellers may set their high prices, but buyers, whether motivated by consumption or investment, have no reason to buy at inflated prices. The reality is that the trading frequency of high-priced BAYC is extremely limited—not that no one buys, but after one or two high-priced transactions, they are no longer listed on the market.

The buyers who "catch the bag" at high prices are not real buyers.

But are there real buyers among them?

Yes, but they are extremely rare. As mentioned earlier, the number of real buyers does not exceed the market listing volume.

The few real buyers are those who believe in the "scarcity narrative" and the appreciation potential of NFTs, those who do not see the risks but only the upward trend, and who believe they can win the lottery—this is the true target audience of NFT issuers.

Participants invest with the mindset of buying lottery tickets, but who the "winning lottery ticket" is is determined by the controlling party. Their entire purpose is to raise prices and then list them at different price levels, ensuring that there are buyers at every tier—essentially, "as long as it sells."

The real business model of profitable NFTs is to raise NFT prices and find a few buyers who believe in the narrative.

The significant price increases of individual BAYC, the raising of floor prices, and the control of listing rates are the most important links in this process.

NFT prices are unrelated to scarcity, consensus, or intrinsic value; the "scarcity narrative" packages a bunch of bad assets as if they were gold, just like the past subprime mortgage crisis—

This can be achieved because in the NFT trading market, "raising the floor price" only requires the listing price to rise, rather than the actual value increasing or the last transaction price rising.

Indeed, the floor price of NFTs does not need to be raised through transactions—the floor price listed in the NFT trading market (at least on OpenSea) is the listing price, not the last transaction price.

Taking BAYC as an example, on December 1, 2023, the floor price of BAYC on OpenSea was 28.8 ETH, which is the current listing price of BAYC#8864. OpenSea shows that its last transaction occurred 6 days ago at a price of 29.4 ETH, but Cryptoslam shows that it was sold 8 hours ago at an unnamed exchange for $16.98. The lowest transaction price of BAYC#8864 is lower than the floor price displayed on OpenSea

Meanwhile, BAYC#9196 was sold for 19.9 ETH at an unnamed exchange 2 hours ago, and BAYC#7410 was sold for 28.1 WETH an hour ago. These prices all occurred within 24 hours and are lower than the 28.8 ETH price, but OpenSea still shows the floor price of BAYC as 28.8 ETH.

The seemingly fair and open NFT issuance platforms and trading markets are part of the price magic.

And they are also the biggest winners of this sleight of hand.

Maintaining Market Value is the Flaw

Additionally, we can prove the scarcity of real buyers in NFTs through one phenomenon: the price of BAYC has yet to return to the minting cost line.

In a long-term recession, the reasonable development of prices is to gradually return to the cost line.

The first visible cost line for BAYC is the minting price, and the second cost line is the initial trading price of 90% of BAYC (ranging from 2 ETH to 1,000 ETH). Assuming that minting and initial sales were all conducted by real buyers, after a long period of market stagnation, the prices listed in the market could always have significant discrepancies, but the floor price would return to the cost line.

However, as of now, on December 1, 2023, the floor price of BAYC on OpenSea is 28.8 ETH, still far from the minting price and the lowest initial sales price.

Something is amiss.

The possible reasons are either that there is not a single existing market real buyer whose cost line is at 0.08 ETH (or even below 20 ETH), meaning not a single market real buyer bought BAYC at the minting and initial low price sale, which indirectly indicates that the floor price is still controlled by market makers.

Or, there are extremely few low-priced buyers who still hope to profit from small investments, but holding back does not mean they have no intention to list for sale. The listing rate of BAYC on OpenSea is 2%, and the overall market listing rate is 3.43%, meaning only about 300 BAYC are circulating for sale in the market. The price distribution is still manipulated by market makers, so the number of real buyers for BAYC must be lower than the listing quantity (343), and almost none of the buyers' cost lines are at the minting price.

At this point, we finally understand what kind of meticulously woven web NFT buyers are facing.

But not everyone is as skilled as auction houses and the BAYC team in this regard.

NFTs are a market where only platform operators who charge tolls have absolute advantages. For most participants, engaging in this market is almost unprofitable, both for buyers and sellers. Issuing NFTs is not a business that guarantees profits—minting NFTs is simple, but finding buyers for NFTs is a task that requires financial resources and determination; it relies on investing massive resources in the right places. The success of BAYC and other blue-chip NFTs lies in the strong financial backing of their teams, as well as their deep understanding of market operations. They understood from the beginning how to use sleight of hand to entice people to enter, while many others still do not understand the market, so they continue to hope for a resurgence of the NFT market in some way.

Conclusion

I have always wanted to write a genuine insight into the NFT market, which led to this article.

What is mentioned in the article is not some brand-new understanding; they should have existed vaguely in the minds of most people who have deeply participated in the NFT market.

However, I still believe it is necessary to systematically clarify the previous market's erroneous assumptions about NFTs. We cannot currently prove what NFTs are, but we can prove what they are not—they are essentially not scarce and even overly abundant; their pricing is based on manipulation rather than consensus; the NFT market is one with extremely limited liquidity and buyers, with most NFTs having almost no real buyers, and its massive market size comes from absurd formulas; the high returns of NFT businesses cannot be achieved simply due to low barriers.

Moreover, those seemingly professional NFT marketplaces, data platforms, including top auction houses, are also part of the sleight of hand; they are eager to deepen people's misunderstandings of the market and embellish some erroneous valuation factors as professional indicators. They have the least motivation to expose this magic trick.

··· Recognizing the dysfunction of the NFT market is equally important—it has not enhanced the overall economic welfare of the crypto industry as expected; worse, it has led to misallocation of resources, both for investors and entrepreneurial teams.

Currently, NFTs are neither good investments nor good businesses. We should not continue to walk further down the wrong path. If the NFT market itself lacks liquidity, how can we release liquidity through NFTfi? If NFTs do not even have real buyers, how can they be used for pawning and liquidation? If the prices of NFTs are castles in the air, how will the market recognize loans based on market prices?

Recognizing the situation, discarding illusions, and preparing for struggle are the hopes for the restructuring of the NFT sector. If NFTs cannot be priced based on scarcity and consensus, then we should start boldly experimenting with new pricing mechanisms; if we recognize that individual NFTs lack trading depth, we will begin to consider aggregating scarce and fragmented liquidity when developing NFTfi, and we will develop new indicators to filter NFTs with real buyers and liquidity for lending or pawning, rather than merely relying on "blue-chip" status to determine their fate.

··· As an anti-anxiety warrior, I also hope to take this opportunity to convey a fact—reality is not as we see it; exorbitant prices and huge profits are often packaged lies designed to lure us in. If you want to seize an opportunity, it is best to first understand how the magician takes coins from our pockets.

When you fully comprehend how profits appear and disappear within a fervent narrative, you may begin to let go of why "the ones making money are always others."

Myths do not exist, and magicians are not simple professions; perfect scams still rely on strong capital backing.

At the same time, the price deception of NFTs is not a special case; deception is both common and inevitable. If we have certain weaknesses that allow us to be deceived, there will always be deceivers waiting for the right moment to implement their deception. This means we need to learn to guard against misleading stories and attention-grabbing focal points, and it also means we will begin to take measures to resist the negative aspects of the market.

We do not need to demand an absolutely perfect industry, but we need a relatively healthy ecosystem, and I hope this is a good start.