An NFT issued by the musician Grimes plunges in value by 84% as celebrity-minted tokens struggle in the market
Celebrities like the musician Grimes have been quick to cash in on nonfungible tokens, making millions from minting collections of their own digital art.
For buyers, however, the payoff has been far less rewarding.
Consider “Earth”—one of several NFTs issued by Grimes in February. Depicting a cherub spearing the globe, perhaps in a reference to her baby with SpaceX’s Elon Musk, it was part of a collection that netted the artist (whose real name is Claire Elise Boucher) about $5.8 million after selling out in 20 minutes. While the cost to originally own one of the 303 limited editions was $7,500, one unit recently resold for just $1,200 in a stunning 84% drop. Likewise, a piece rapper A$AP Rocky sold for $2,000, showing him spinning around in space, in April just traded for about $900.
The list goes on. After seeing artists like Beeple make tens of millions from selling nonfungible tokens, a slew of celebrities including singer Shawn Mendes, socialite Paris Hilton and wrestler John Cena have jumped on the bandwagon to create their own digital art tied to blockchains. However, the prices of many of these art pieces have declined precipitously since their release. The resale market outside of fans appears to be small, with long-time NFT investors shunning the category as a money grab.
Certainly there are more profitable corners of the NFT market, which hit a record of more than $300 million in daily sales at the end of August, according to tracker NonFungible. CryptoPunk #561, which initially sold for about $8,000, recently fetched more than $2.4 million. Bored Ape Yacht Club #2224 also recently traded for more than $335,000, up from less than $10,000 five months ago, per NonFungible.
But for most celebrity-backed endeavors, the trendline is down, even though famous people are ironically a big reason for the NFT boom. Celebrity tweets and videos promoting NFTs to millions of fans—who already buy their T-shirts, autographs and other merchandise—has had the power to expand the market for nonfungible tokens beyond its original domain of geeky techies.
“Shawn Mendes did around $1 million in digital-goods sales in 10 minutes,” said Akash Nigam, CEO of Genies, which worked with the artist on the NFT drop. “The majority of those buyers were on non-crypto.”
Still, Mendes’s NFT of himself as an avatar holding a guitar recently fetched half the price in Ether it sold for at its debut nine months ago. To be sure, the price of Ether nearly tripled over the time span, meaning the NFT’s dollar value did increase. But some might argue the buyer would have been better off simply holding the world’s second-biggest cryptocurrency.
“From what we’ve seen so far, most of these collections don’t have much liquidity, which is one of the two ways for NFT collections to die: lose value or get frozen,” said Gauthier Zuppinger, chief operating officer of NonFungible. “It’s probably too soon to draw any conclusion for now, but it looks like these were more experiments than truly valuable collections.”
Long-time NFT investors are mostly staying out of the celeb NFTs market as well.
“There are some that are done tastefully i.e. Paris Hilton’s drop with Nifty Gateway, and there are some with poor design, poor launch partners and poor execution,” said WhaleShark, one of the world’s biggest NFT collectors, who bought an NFT from Paris Hilton but is staying away from other celeb NFTs. “The latter tend to come across as money grabs, rather than a true leveraging of one’s fan base to drive NFT mainstream adoption.” A Hilton NFT of a hummingbird that sold for $10,000 in April last sold for $12,000.
While each celebrity NFT deal is unique, most are arranged in a similar way. The platform that sells the art takes a cut off the top—say 15% or 20%—and the star then takes the largest portion of what remains, splitting some with other stakeholders like designers and firms that brokered the deals. Many celebrities also get a cut of an NFT’s secondary sales of about 2.5% typically.
Promotion in driving the first sale is critical, and each drop requires the celebrity to create as much hype as possible, or the project will likely bomb. Autograph, a project co-founded by quarterback Tom Brady with advisers like tennis star Naomi Osaka, sold out of all it recent drops “within seconds,” Dillon Rosenblatt, the company’s CEO said. “I think the consumer can feel the authenticity. If the celebrity is not involved and engaged, I’ve seen NFTs not do so well.” In other words, it requires celebrities to be deeply involved: Skateboarder Tony Hawk recently did a Q&A with fans on Discord for 45 minutes.
Among the less successful celeb NFT drops is talk-show host Ellen DeGeneres’s “Woman With Stick Cat” for charity that sold a little more than half its units. Pro-wrestler and actor John Cena’s collection with World Wrestling Entertainment Inc. was also a dud, even with television ads and packaging that included clothes and gear.
“Myself and the folks in the WWE thought $1,000 was a fair price point: We were wrong. We were absolutely wrong, ” Cena said at a convention in Florida in September. “I’m like, man, with a value like that, the 500 of them will be gone. We sold 37 of them. It was a catastrophic failure.”
Meanwhile, more celeb NFTs are coming. Director Quentin Tarantino just listed uncut scenes from “Pulp Fiction” as NFTs on OpenSea. So far, there are no takers.
“What I’ve found is that celebrity status doesn’t have the same effect in the NFT world as people share a similar skepticism,” said Danny Maegaard, a big NFT investor who is staying away.
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