The rise and fall of NFTs - From $25B to worthless

In 2021, over $25 billion worth of NFTs were traded, many for tens of millions of dollars. And that was crazy considering that just a few years earlier in 2017, the technology didn't even really exist at all. But by 2025, the majority, over 95% of those NFTs were totally worthless, and almost all of them were worth less than what the buyers had paid for them. This video is the rise and fall of of NFTs.

Oh, and by the way, this video is done in partnership with Incogni. More on that later.

First, I'm gonna stay totally non-technical in this video. An NFT is called a non-fungible token. If you wanna look up what it is, go Google it. If you wanna think of it as a layperson, think of it as like a digital baseball card. There's only one of 'em, it could be traded around, and it has value in theory. Our story starts back in 2017 with a thing called CryptoKitties. It was a unique digital game, one of the first NFTs, that allow people to develop, breed, and trade digital animals. One CryptoKitty even sold for $117,000 in December 2017, and the game was so popular that it even overwhelmed the Ethereum network for a period of time. And this was a hint of the mania to come. And at this time, seeing this happen, two young entrepreneurs, Devin Finzer and Alec Attala, saw an opportunity. And so in early 2018, they pivoted their startup and became OpenSea, a marketplace for crypto collectibles. In other words, NFTs. Even still, things started out slow. As early as early 2020, OpenSea had only a few hundred users on the platform, and most people hadn't even heard the words non-fungible token. Yet behind the scenes, developers were finding the technology that would eventually allow this whole thing to become a phenomenon, refining the different standards and the tools that would be used to buy and sell NFTs. And the crypto community is notoriously full of early adopters, and those people were already playing with things things like CryptoPunks, which were, you know, pixelated characters, and things like Decentraland, which was virtual land. And at the time, these things were quietly trading amongst the enthusiasts. It was the calm before the storm. And then the spark came, and in early 2020, we saw COVID. And COVID brought with it two things in terms of the global pandemic. The first of it was people were stuck at home all day. In fact, internet usage during the period of early COVID spiked by over 60%. And the second thing was that the government printed over $10 billion worth of subsidies and giveaways to businesses, small businesses, and importantly to individuals. And all those folks were suddenly looking for places to speculate and put that money to work. And with this spark, the NFTs were about to break the containment of being just a niche thing for crypto enthusiasts and one that was going to hit the mainstream. And one of those first things to go mainstream was a product by the NBA called NBA Top Shot, which basically allowed collectors to buy sell and own quote unquote highlights of individual sports games. Fans rushed in. It was something licensed by the NBA. And in February through March 2021, they sold over $200 million of these digital collectibles. Famously, a LeBron James dunk clip sold for over $200,000. And well, people saw that. In March 2021, an artist named Beeple, who goes by the name Beeple, named Mike Winkelmann, famously auctioned off some of his art at Sotheby's for an astounding $69 $69 million, the most ever paid for an NFT. People saw this and Beeple suddenly became famous overnight as a contemporary artist. You can imagine what happens next. Suddenly the press sees this happening, articles happening. People start to see the thing and want to pile in and see if they can make some money too. In early 2022, we had Paris Hilton and Jimmy Fallon casually talking about their NFTs and how they'd spent hundreds of thousands of dollars on their Bored Ape Yacht Club NFTs. Can you explain what an NFT is? A non-fungible token. Actors like Snoop Dogg, celebrities like Steph Curry, suddenly anybody and everybody was launching their own NFT, buying and selling and being part of the game. And I remember this time it felt like you were missing out if you weren't playing the NFT game. This is frankly how manias feel. Suddenly everybody is talking about it and you feel like everybody's getting rich and you're not. If you're not playing. The Bored Ape Yacht Club was a set of 10,000 algorithmically generated pictures of apes, uh, that were designed to be an NFT that went along with time an online community and club. At the mint time when they were created, they went for about $200, but they went from there to selling often for hundreds of thousands of dollars apiece for the rare ones. And it was insane to see digital pictures of a goofy monkey selling for more than a house. But things like that, well, seemed crazy in retrospect, but at the time, well, felt perfectly normal. And remember OpenSea, the startup we talked about towards the early part of this video that had pivoted in 2018? That pivot had been smart. By 2021, they were handling over 90% of the NFT trades that were happening on the internet. In February 2021, right after the $69 million Beeple sale, their trading volume went up by 14 times between February and March in one month alone. In mid-2021, OpenSea raised a funding round of $100 million, valuing the company at over $1.5 billion. With the mania continuing on, investors kept piling in. In January 2022, less than 6 months later, another $300 million was raised by OpenSea at a staggering $13.3 billion in valuation. And our founders of OpenSea, Finzer and Attala, each still in their 20s and owning 19% each of the business, well, suddenly they were billionaires in their 20s, at least on paper. Dozens of NFT marketplaces, tools, and startups, well, they sprung up as more and more venture capital flooded into the space. Celebrities like Mark Cuban, Ashton Kutcher, Carrot Top, I bet. I don't know for sure. That's a joke. They were flooding in, playing the NFT game themselves, backing startups, buying and selling, doing the whole thing. People were spreading these huge visions that NFTs were revolutionizing everything from how we collect to property titles and everything in between. It was a classic gold rush moment when everybody thought, well, they could get rich. And we've seen these before. If you remember Beanie Babies, have a Beanie Babies. The gold rush in the 1800s, meme stocks in the 2020s, the dot-com boom in the 1990s. Man, history doesn't repeat, but it sure does rhyme. And this was a purebred mania. And every mania follows the same pattern. Early adopters, they get rich. The thing breaks containment. Mainstream catches on. The middle and late adopters pile on. But eventually you run out of buyers for whatever the mania is creating. And then there's a crash and some people get rich. But most people, well, they lose money. And by the way, I traded some NFTs too. It was fun. Guess what I did? Yeah, I lost money. But even still, everybody had gold in their eyes. They thought that buying and selling, flipping, minting, selling tools for NFTs is a chance to hop in on the gold rush and get rich. But just like all the people who went to San Francisco to mine gold back in the 1800s, most of them came back broker than they left. Well, turns out the same thing was going to happen here. And to show how crazy things had gotten at the market's peak in March 2022, A simple picture of a rock sold as an NFT was sold for an astounding $1.3 million. And before I explain to you how it all went wrong, here's a quick word from our sponsor.

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The first sign that things were going to go wrong was an interesting and sobering fact. In spring 2021, only about 30,000 to 40,000 people a day were trading NFTs. Which was just a tiny fraction considering how they had become a global phenomenon. In other words, only a few people were really doing most of the trading. You see, as with most booms, scammers learn they can scam pretty quickly. And one of the things that people figured out they could do was trade amongst themselves to artificially inflate the value and therefore momentum of particular NFTs. So you run up the price between you and your friends, and then eventually you wait for a sucker to come in buy it, and you guys exit with all the profits. It was like you and your buddies went to an auction and colluded to run up the price until some sucker overpaid for whatever item was being auctioned off. And at the peak in January 2022, when over $17 billion worth of NFTs were traded that month, one study noted that over 60% of the trades were intended and part of scamming folks and running up the prices to find suckers. This kind of fake trading proved that the market was even smaller and more concentrated than even all of us thought at the time. But people bought into it. As an example, the first tweet ever was minted as an NFT. It was a tweet by Jack Dorsey. It sold in March 2021 for $2.9 million. The buyer was interviewed by news site Reuters, and he famously said, "This is not some joke." He famously said, "This is the Mona Lisa of the digital world." Yeah, he said that. And fundamentally, people like this buyer believe that the idea that scarcity in itself created some sort of value. There's no cash flow from these NFTs. For most of them, they're just pictures of monkeys smoking pot. And just because something is scarce, well, that doesn't mean it's valuable. In April 2022, when this buyer tried to resell the Jack Dorsey tweet NFT, the highest offer he got was $6,800. In other words, it had dropped 99.8% in value. Part of this was that we started to enter another crypto winter, as they call it, where things like Bitcoin and Ethereum and other stuff basically go through a downward cycle and pressure. And during this time, those cryptocurrency prices went down over 70% from their peak. And remember, NFTs aren't bought in a vacuum. They're mostly purchased with crypto. And if crypto itself is going down in real dollars, well, that means there's fewer dollars to prop up the NFT market. In January 2022, crypto sales on the platform hit $17 billion, and just 9 months later in September, they had fallen by over 97% to $466 million in September 2022. OpenSea's trading volume and therefore its revenue was going through the floor. In July of 2022, they had to go in and cut costs quickly with revenue falling and laid off over 20% of their staff. One investor marked down their investment that they had made at the $13.3 billion peak in OpenSea by over 90%, valuing the startup at less than 10% of what it was worth when they invested. The NFT market started to lose trust as some of the kind of shenanigans started to come out. In September 2021, a scandal hit OpenSea OpenSea in particular, it turned out one of their executives had been quote unquote front-running a lot of the things that were going to show up on the OpenSea platform. In other words, buying things that were eventually going to get offered to others before they knew they were coming. This is basically insider trading of NFTs. And, uh, well, people didn't like getting scammed, and that guy was eventually arrested and prosecuted for stealing from people. It wasn't good. Elsewhere, people fell for phishing scams where basically attackers would hack your NFT wallet and steal all of your crypto. Other people fell for scams where they were rug pulled. In other words, the person who would promote a new project would sell everything once buying folks had jumped in and lie about how long they were going to stay. Left and right, the scammers were having a field day. Other projects like one famously called Terra/Luna basically like failed completely, wiping out tens of billions of dollars. And all this stuff together basically just meant people were losing trust by this time in the NFT market. In general. By 2025, the market for NFT art, a particular corner, had collapsed 93% from its 2021 peak. And the vast majority of NFTs, well, at this point they can't be sold for much of anything. You see, the vast majority of NFTs were traded for a few hundred dollars, but in reality today, most of them can't get a few hundred cents. NFTs in general are things that don't generate income. It's not like owning a piece of real estate or an apartment building. You're basically just speculating on the hopefully that other people will place value in your thing. And given all of that, and that supply just kept going as more and more people initiated more and more NFTs, well, eventually supply radically outpaced demand. Even the original kind of Rolls-Royce versions of a lot of these different crypto projects like Bored Apes, well, they were down 80% or more from their highs by 2023. Bored Apes, CryptoPunks, Cool Cats, Art Blocks, all of these once kind of, you know, Tiffany-level versions of NFTs, they're all drastically down from their highs. There's still a lot of kind of playing around with NFTs and different brands and artists are using them as ways to connect with fans. But in reality, the music stopped and the speculation is all over today. A 2023 analysis showed that over 95% of NFT collections are totally worthless. In other words, zero buyers, zero dollars, and zero transactions. In other words, over 23 million people's NFTs are effectively worth $0, no matter what they paid for them. And who knows, at some point in the future, NFTs and that sort of thing may come back and another fad may hit. Crypto itself, especially Bitcoin, has gone through it over and over again of falling in and out of fashion. But for now, all this stuff ain't worth squat. And most of the people who got into NFTs, they lost money. If you look in the world of manias, they happen over and over again because of human nature. This is how we are wired. We see other people getting rich and we decide we're going to copy them and we jump in and And in that kind of logical fallacy, we just keep going with it and piling more and more money in. And obviously as an individual, I think it's on us to realize these manias and avoid getting burned. Or if you're going to get burned, just lose a small enough money that, well, you had a good time doing it, which I definitely did. But in reality, as business owners, the lesson is, is that manias, whether it's the dot-com boom or the gold rush in California in the 1800s, the people that end up making a lot of money in those situations are the ones who sell things to the people playing in the gold rush. And my favorite one is Levi's Jeans famously started making pants for the miners who were going up to the Sierra Nevada to try and strike their richness. And in the end, basically Levi was the one that made the big fortune compared to most all of them. If you can figure out how to make tangible, lasting value and maybe have a mania fund that for you, that's a great thing. And I think there's a lesson in here. All right. That's it. Let me know what you think about this video. And this story is totally fun to research. Let me know in the comments below. I read them all. Catch you later.