The hype around digital certificates is a pyramid scheme.

NFTs are on everyone's lips. In all media you can read information about them every day, podcast series are booming. 

In last week's blog we dared to try to work out the basic pros. This week, we look at the cons.

What does one do with a virtual designer sneaker?

Apparently, there are quite a few people who think they know the answer to this question. At least on the Internet platform RTFKT, you can spend thousands of dollars on brightly colored unique sports shoes that exist only in cyberspace.

Thanks to NFT technology, which has just become fashionable, fans of rare intangible and expensive sneakers can indulge their passion without restraint. The same applies to lovers of other collectibles ranging from fine art to mundane soccer pictures.

Decadent spawn in the financial market

This not only sounds strange, it is. The NFT hype is yet another indication of the late-decadent party in the global financial markets that will eventually end with a gigantic hangover.

There are two phenomena behind the new cyber-collecting passion: the allure of new technology and the liquidity glut that is moving into ever more exotic markets. Neither trend is sustainable.

The litmus test is still to come

The allure of the new will quickly wear off, and once the global investment community gets seriously nervous, liquidity will first disappear from the riskiest and most remote parts of the market - and that undoubtedly includes NFTs.

Then it will become apparent that phenomena such as the hype surrounding unique crypto tokens are nothing more than Ponzi schemes.

Investors in a desperate search for yield are driving up the prices of increasingly obscure assets, and this is attracting speculators who are further fueling inflation in this asset class.

The big losers will be those who get in last and still have money on the table when the smarter speculators have long since exited.

The crucial question is, when does a passion for collecting become speculation?

The most important distinction is that the collector is interested in owning the coveted item, while the speculator is interested in trading it for the highest possible profit. The boundaries are fluid, but in the NFT market they seem to be shifting towards speculation at a rapid pace.

At the beginning of the notorious tulip mania in the Netherlands in the 17th century, there was probably also the innocent joy of the rare colorful blossoms. How it all ended is well known. Even after nearly 400 years, Dutch tulip hysteria is still considered the mother of all speculative bubbles.

The latest one is inflating right now on the NFT market.

So now we have tried to show you once the pros and cons of the forming NFT market concentrated in two blogs. 

What do you think? Where is the journey going?

We at iMBdigital.Gallery_ have a sneaking suspicion that we are currently facing a massive consolidation. But think about how dramatically the initial hype of Internet companies collapsed at the turn of the millennium. Very many predicted at the time that the Internet economy was finished. 

Keep in mind that NFTs are digital certificates of authenticity built on blockchain business models. And this technology has a previously limitless field of growth ahead of it. Whether pixelated colorful pictures of bored monkeys will still play a role there is a completely different question. But one should not make the mistake of equating the technology behind it with one of the current asset classes.

Let's embark on the journey!