Coinbase Co-Founder, Fred Ehrsam, shared his thoughts on the NFT gold rush which has become the focus of a national conversation. He boldly asserts that 90% of NFTs will have little to no value in 3-5 years.
This statement is causing quite a stir in the NFT space because the velocity with which money is coming continues to captivate fans and collectors. In fact, celebrities, games and major brands are now driving the NFT ship even more than those who started the trend, digital artists.
Breaking down Coinbase Co-Founder’s Statement
Fred Ehrsam is considered one of blockchain’s thought leaders. He began trading Bitcoin 11 years ago while working as a FOREX trader at Goldman Sachs. He left his lucrative investment banking career to cofound Coinbase with Brian Armstrong in 2012. This turned out to be a great decision because Coinbase grew to become the world’s largest cryptocurrency exchange with over 56 million users.
In his Bloomberg interview, Ehrsam pointed out the similarities between cryptocurrencies and the dot-com boom of the 1990s. He said, “I go so far as to say that 90% of NFTs produced, they probably will have little to no value in three to five years. You could say the same thing about early internet companies in the late ’90s.”
The Coinbase Co-Founder further asserts that NFTs are no different than any other crypto project born out of the hype overnight. Bitcoin’s progression and price action back this statement up. Ever since Bitcoin’s appearance in 2009, blockchain enthusiasts have claimed that it would disrupt industries. The gospel was that medical records, stock markets and even agricultural inventories would use the blockchain. Fast forward to 2021, little of this happened despite Bitcoin reaching all-time high prices.
“People are going to try all sorts of things. There’ll be millions and millions of cryptocurrencies and crypto-assets, just like there were millions and millions of websites. But, unfortunately, most of them won’t work,” Ehrsam explained.
It is worth pointing out that ICO Projects and NFTs have one stark difference. The majority of ICO Projects were meant to be built from the ground up and a huge chunk didn’t materialize after raising funds. On the other hand, most NFT Projects complements already existing and successful businesses, brands, celebrities and athletes. As such, the levels of disruption and adoption are entirely different.
Running discussion on NFT Bubble Burst
Due to the dizzying stratospheric prices of NFTs, there’s always speculation that the NFT bubble is fated to burst at any moment. NFT charts recorded that overall sales plunged from a 7-day peak of $176 Million in May to just $8.7 Million on June 15. This first dip means volumes are now roughly back where they were at the start of 2021.
To understand the NFT Market, we need to look at the primary consumers. Generally, the consumers are wealthy young crypto enthusiasts who have invested in crypto for years and have seen those holdings reach millions in value. This is also the reason why the NFT market is generally being driven by speculation. Many collectors regard their NFTs as a potentially lucrative investment much like Bitcoin.
What’s interesting though is that most collectors are anticipating that the NFT craze will die down for a long cycle, leaving collection worth very little for years or even decades. However, since most collectors are crypto enthusiasts, they are aware of BTC and ETH price corrections. Bitcoin and Ether have plummeted in value several times but they recovered each time and surged to record-breaking heights. So the general sentiment is that the NFT market is like to go through similar shakeouts to remove the weaker hands.
In fact, NFTs showed resiliency when the crypto market crashed back on May 12. Bitcoin lost 30% of its price after Elon Musk announced that Tesla wouldn’t push through with accepting Bitcoin as a mode of payment. Panic trading ensued and more than one million traders liquidated in one day. Despite this, users continued to purchase, trade and sell NFTs. In fact, NFT transactions sore even higher when crypto prices started to plummet. Daily transactions reached 94,000 NFT versus a previous high of 82 373.
Coinbase Co-Founder Recognizes Merits of NFTs
The Coinbase co-founder didn’t really dismiss the NFT technology. Instead, Ehrsam believes that fluctuations aside, cryptocurrency is truly the next internet-sized opportunity for the United States.
He added, “The world doesn’t change overnight, but you can see the seeds of exponential growth occurring already. I think we will live in a future where we won’t need these centralized platforms today for us to coordinate. That’s already true of financial services, in that you can be your own bank. You don’t need a central institution to hold your money anymore.”
Stretching it a bit, the trends suggest that these are the early days of a grand shift to an economy where creators will sell anything digital. Beeple argues that digital art is far more influential now than traditional painting or sculpture. He asserts that technically since we are in the digital age, everything we are looking at right now is made by digital artists.
To build a new creator economy using NFTs one thing has to change. NFTs have turned into a hit-based, winner-take-all game of speculation. To build a new creator economy using NFTs this has to change. Based on reports, a tiny minority of artists and collectors held most of the wealth produced by NFT art. For example, Farzin Fardin Fard, a music recording studio owner in Dubai has a near-monopoly of the meme space. He owns Disaster Girl, Charlie Bit Me, Overly Attached Girlfriend and Creepy Chan.
Most NFT projects are putting a premium on building eco-friendly projects and partnering with green blockchains like Tezos. This is because the blockchain space is being scrutinized for its energy use. However, the Coinbase Co-founder has a different view and doesn’t see it as a deal-breaker. He said, “My personal view is it’s actually going to be a lot more energy-efficient to use these digital systems of value transfer over time. But it’s understandable that there’s a lot of confusion early.”
Despite Ehrsam’s controversial statement, there’s a consensus that NFTs are here to stay and history is still being written.