The non-fungible bubble: how NFTs inoculated the industry against greed

In a comparatively short time, NFTs went from glittering innovation to a largely marginal investment tool. Mass-minted collections, rampant speculation and market manipulation did the rest: by 2024, analysts estimate that 96% of collections were “dead”.

Lina Valitova examines what remained after the NFT bubble burst.

Why did the bubble inflate?

In March 2023, staff at a Swedish financial institute published a study, NFT Bubbles. The authors analysed more than 10m transactions covering over 6m NFTs from 4,000 collections. They offered a detailed account of the boom-and-bust cycle and identified patterns that can help spot the emergence of new market bubbles.

Two types of investors

The NFT market brought together two key cohorts: speculators and seasoned investors. The former focus on flipping assets for quick profit, often ignoring a token’s fundamental value. The latter assess the market more carefully, weighing long-term value and economic metrics. The study shows that when speculators dominate, bubbles form as prices are pushed up artificially.

The ingredients of a bubble:

1. High volatility and price acceleration. Marked volatility and sharp short-term price rises are harbingers of crashes. Prices climb quickly on surging interest, but such momentum is unsustainable, leading to corrections.
2. Low liquidity and poor diversification. Collections with concentrated ownership and thin liquidity face a higher risk of collapse. When too few players hold sway, any shift in their behaviour can move prices violently.
3. Wash trading. Some projects artificially inflate volumes to create the appearance of popularity. This manipulation raises the risk of collapse because it rests on a false price dynamic.
4. Lack of sustained interest and utility. NFTs without real applications or utility are prey to speculative fads. When the frenzy fades, such projects lose appeal and are dumped en masse.

In short, the NFT bubble swelled through a mix of high volatility, a glut of speculators and manipulation. Those forces drove prices up and laid the groundwork for their inevitable fall. Understanding them helps forecast market behaviour and avoid similar mistakes.

Winners and losers

Flops: headline NFTs that lost value

In March 2021, Twitter founder Jack Dorsey sold his first tweet as an NFT for $2.9m. The sale drew intense attention as it showcased a novel way to monetise digital content.

In April 2022, the token was listed for $48m, but the top bid came to just $280. At the time of writing, that NFT is priced at 0.8 ETH ($3,000 at the exchange rate on 10 December 2024).

A similar case is a token from the cult collection CryptoPunks. In 2022, CryptoPunk #5822 changed hands for 8,000 ETH ($23.7m at the time). In August 2024 it was sold to an X user with the handle VOMBATUS, who said he bought it for 1,500 ETH (about $3.9m) — an 80% discount to the previous price.

Another flop came from Bored Ape Yacht Club (BAYC). In January 2022, BAYC #3001 was bought by an account linked to Justin Bieber for 500 ETH (then $1.3m). Today the token is valued at 18.2896 WETH ($68,687 at the time of writing), implying a loss of more than $1.2m.

These examples show how projects lacking long-term value or utility are vulnerable to rapid depreciation. They have become emblematic of a market that, when built on hype alone, cannot sustain itself.

Successful projects: what keeps them afloat

Against these failures stand projects that managed to prove their worth. Despite falling prices for some individual tokens, Bored Ape Yacht Club evolved from pictures into a key to exclusivity. BAYC holders gain access to a closed community, invite-only events and additional assets, making the tokens a part of their digital identity.

Another success is the integration of NFTs into real-world business. Nike’s acquisition of RTFKT showed how tokens can power virtual apparel and accessories that complement the brand’s physical products. This turned NFTs from collectibles into a consumer-engagement tool. Although RTFKT later announced a shutdown, its experience remains a meaningful case study.

Music is another area that validates the technology. Web3 counterparts to Spotify and SoundCloud, such as Audius, use NFTs to support artists. These platforms let creators issue exclusive music tokens granting access to unique content (unreleased tracks or behind-the-scenes material). The approach tightens the bond between artists and fans while creating a new revenue stream. Such solutions help the music industry become more decentralised and transparent, cutting out intermediaries and giving creators more control over their work.

New avenues and prospects

Despite waning mass interest, NFTs continue to evolve, finding new uses and deepening existing ones. Metaverses, gaming, digital property rights and data verification are areas where the technology is accruing real value.

NFTs in metaverses and gaming

What does the average NFT buyer look like? Drawing on several datasets, he is a male millennial from Thailand (according to Morning Consult). His name is Sarawut (the most popular male name in the country). He is keen on video games and actively uses NFTs in them.

According to NonFungible’s 2022 report, his NFT outlays are modest — no more than $100 per item. Most often he buys virtual clothing or gear for game avatars, a pattern confirmed by Civic Science, which highlights strong interest in virtual fashion among NFT buyers.

Metaverses and games are a natural home for such assets. Virtual worlds demand unique digitised items, from avatar outfits to land and vehicles. NFTs secure property rights to these assets and make it easy to move them across platforms. That makes gameplay not only engaging but economically meaningful. Games that integrate NFTs (for example, Axie Infinity or The Sandbox) have built full-fledged ecosystems in which users can earn and developers retain audiences through novel mechanics.

Data verification and digital property rights

Data verification has become a promising use case. NFTs let information be recorded on a blockchain, opening the door to certification: tokens can attest to ownership, authorship or even completion of a course. Some education companies already offer NFT diplomas.

Non-fungible tokens also strengthen property rights online. In the traditional model, assets often remain under the control of the platforms on which they were created. NFTs change that paradigm. They give owners full control over an asset, whether a work of art, a musical composition or a patent.

Conclusion

NFTs travelled from revolutionary idea to emblem of greed — at once a cautionary tale and a new step in the evolution of digital technology. The causes of their rise and fall show a market hobbled by thin utility and excessive speculation, culminating in a mass collapse.

Yet NFTs leave a valuable legacy: new ways to apply blockchain, stronger digital property rights and thriving ecosystems in metaverses and gaming. These lessons and gains suggest that, despite the slump, NFTs will continue to develop as part of a more resilient digital economy.