These days, the investment world seems more prone to fads and fashions than ever before, but it really jumped the shark with non-fungible tokens.
NFTs were so hard to explain that cryptocurrencies seemed a model of simplicity by comparison, while the irrational mania they unleashed made overblown meme stocks such as GameStop and AMC Entertainment look like steady, sensible trades.
Absolutely nobody who has read anything about NFTs will be surprised to learn that after prices rocketed to the stars in 2021, the direction of travel has subsequently been the other way – and at a similar speed. In technical terms, they have tanked.
So, can we consign NFTs to history alongside other irrational bubbles such as tulip mania and the metaverse, or is there a sensible idea lying in the rubble?
For those still wondering, Wikipedia describes an NFT as “a unique digital identifier that is recorded on a blockchain, and is used to certify ownership and authenticity”.
It cannot be copied, substituted, or subdivided, which makes it a handy mark of ownership, allowing NFTs to be sold and traded.
Art, music and magical sports moments were all packaged up as NTFs and sold to the highest bidder.
For a while, they fetched huge, ridiculous sums. In March 2021, a bidding war drove the cost of buying Twitter founder Jack Dorsey's debut tweet to a staggering $2.9 million.
An NFT collection of cartoonish monkeys called Bored Ape Yacht Club went for up to $429,000 each, while a basketball fan paid $387,600 to secure ownership of a LeBron James slam dunk against the Houston Rockets, part of the NBA Top Shot Moment series.
Artists showed they had an eye for commerce, too. Famously, digital artist Michael Joseph Winkelmann, known professionally as Beeple, auctioned an NFT of his work Everydays: The First 5000 Days at Christie's. Originally priced at $100 it went for $69.3 million.
Whatever your view of Beeple’s art abilities, few can dispute his financial acumen. He was paid in Ethereum but instantly converted the lot into US dollars.
Celebrities got swept up in the trend including Snoop Dogg, Paris Hilton, Lindsay Lohan and Justin Bieber. Madonna, naturally.
This level of insanity was only going to end one way.
Last year, as inflation surged and war in Ukraine raged, the Bitcoin price crashed by three quarters to $16,600 and took NFTs down with it. Monthly trading volume plummeted by 81 per cent between January 2022 and July 2023, DappRadar data shows.
It is not known how much the Everydays NFT would auction for today, but here is a clue.
Last year, Sina Estavi, chief executive of Bridge Oracle and the purchaser of Mr Dorsey's tweet, tried to resell what he once called the “Mona Lisa of the digital world”. He called off the auction with bidding at $14,000.
At least his money went to a good cause, as Mr Dorsey had donated Mr Estavi’s £2.9 million to charity Africa Response.
As with every bubble, real money is lost.
While cryptocurrencies have stabilised in 2023, NFTs are still struggling, says Vijay Valecha, chief investment officer at Century Financial, who, no doubt, speaks for many – if not the majority – when he says “the drastic fall in NFT prices confirms that they are nothing more than a passing fad with an uncertain future”.
When assets are bought primarily for speculative purposes rather than their intrinsic value, the bubble will always burst.
“It didn’t help that the NFT market was quickly saturated with low-quality, trivial assets,” he says.
The digital world changes rapidly and an “overhyped niche concept” such as NFTs is particularly vulnerable, Mr Valecha adds.
“Concerns about the environmental impact of blockchain technology, which underlies NFTs, also cast a shadow and the pain may not be over yet.”
Fears of a regulatory clampdown are not helping, with the US Securities and Exchange Commission now looking at the sector.
The early excitement over NFTs in Silicon Valley was similar to the gold rush, says Leo Smigel, founder of Analyzing Alpha, an algorithmic trading specialist. “Everyone wanted in, but not many knew what they were getting into.”
What the sector lacked was a solid use case for the average consumer. “NFTs haven't found their killer app yet, but to say they'll vanish into oblivion is too simplistic.”
Mr Smigel says NFTs have opened doors to applications we have yet to even think of in collectibles or decentralised finance, for example.
“Now, they need to prove their worth, like a rookie athlete who had a stellar first season but has to deal with a sophomore slump.”
NFTs are down but far from out, says Hadley Chilton, partner in financial restructuring and asset management specialist Cork Gully.
A number of large brands have a practical use for NFTs and smart contracts, where proving something is important.
“They can use them to enhance their loyalty schemes, improve supply chain data, ESG [environment, social and governance] reporting and audit, or to democratise certain asset classes such as high-value real estate. These offer much better prospects than owning a digital receipt for a trending cartoon picture,” Mr Chilton says.
Watch: Boy, 12, makes $500,000 creating and selling NFTs online
Chris Trew, chief executive of blockchain development platform Stratis, sees opportunities in the video games industry.
“In traditional games, players collect items by achieving new levels or winning battles. Imagine if you retained ownership and could convert these digital assets into real-world monetary value,” he says.
Alternatively, gamers could, for example, transfer their NFTs to another game.
“A player might be rewarded for successful gameplay by earning a unique piece of armour or a weapon, which is only available to others if it is for sale. It could supercharge demand for certain games.”
NFTs could also help the ticketing industry combat risks such as fraud, loss and touting, and allow agencies and artists to earn a percentage where tickets are resold.
“Tickets can become collectables, while holders might gain access to exclusive content like swag, VIP access and loyalty programmes. We are already seeing interest from events organisers and venues,” Mr Trew says.
Tom Grogan, chief executive of emerging tech strategic consultancy MDRx, says the NFT sell-off was “just the market sorting and valuing NFTs according to their merits, which have irritatingly been low or non-existent to date”.
He says the crazy hype cycle is mercifully over but the technology is still standing. “We will see more nuanced, intelligent applications from gaming assets to industrial supply chains and ticketing, properly interrogated on a case-by-case basis.”
The NFT bubble has played out in the usual way, but as we saw after the dot-com meltdown at the start of the millennium, a crash is part of the process and the underlying concept may still have a bright future. After all, we are still using the internet.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
How to wear a kandura
Dos
- Wear the right fabric for the right season and occasion
- Always ask for the dress code if you don’t know
- Wear a white kandura, white ghutra / shemagh (headwear) and black shoes for work
- Wear 100 per cent cotton under the kandura as most fabrics are polyester
Don’ts
- Wear hamdania for work, always wear a ghutra and agal
- Buy a kandura only based on how it feels; ask questions about the fabric and understand what you are buying
'Top Gun: Maverick'
Rating: 4/5
Directed by: Joseph Kosinski
Starring: Tom Cruise, Val Kilmer, Jennifer Connelly, Jon Hamm, Miles Teller, Glen Powell, Ed Harris
The language of diplomacy in 1853
Treaty of Peace in Perpetuity Agreed Upon by the Chiefs of the Arabian Coast on Behalf of Themselves, Their Heirs and Successors Under the Mediation of the Resident of the Persian Gulf, 1853
(This treaty gave the region the name “Trucial States”.)
We, whose seals are hereunto affixed, Sheikh Sultan bin Suggar, Chief of Rassool-Kheimah, Sheikh Saeed bin Tahnoon, Chief of Aboo Dhebbee, Sheikh Saeed bin Buyte, Chief of Debay, Sheikh Hamid bin Rashed, Chief of Ejman, Sheikh Abdoola bin Rashed, Chief of Umm-ool-Keiweyn, having experienced for a series of years the benefits and advantages resulting from a maritime truce contracted amongst ourselves under the mediation of the Resident in the Persian Gulf and renewed from time to time up to the present period, and being fully impressed, therefore, with a sense of evil consequence formerly arising, from the prosecution of our feuds at sea, whereby our subjects and dependants were prevented from carrying on the pearl fishery in security, and were exposed to interruption and molestation when passing on their lawful occasions, accordingly, we, as aforesaid have determined, for ourselves, our heirs and successors, to conclude together a lasting and inviolable peace from this time forth in perpetuity.
Taken from Britain and Saudi Arabia, 1925-1939: the Imperial Oasis, by Clive Leatherdale
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
UAE currency: the story behind the money in your pockets
Tips on buying property during a pandemic
Islay Robinson, group chief executive of mortgage broker Enness Global, offers his advice on buying property in today's market.
While many have been quick to call a market collapse, this simply isn’t what we’re seeing on the ground. Many pockets of the global property market, including London and the UAE, continue to be compelling locations to invest in real estate.
While an air of uncertainty remains, the outlook is far better than anyone could have predicted. However, it is still important to consider the wider threat posed by Covid-19 when buying bricks and mortar.
Anything with outside space, gardens and private entrances is a must and these property features will see your investment keep its value should the pandemic drag on. In contrast, flats and particularly high-rise developments are falling in popularity and investors should avoid them at all costs.
Attractive investment property can be hard to find amid strong demand and heightened buyer activity. When you do find one, be prepared to move hard and fast to secure it. If you have your finances in order, this shouldn’t be an issue.
Lenders continue to lend and rates remain at an all-time low, so utilise this. There is no point in tying up cash when you can keep this liquidity to maximise other opportunities.
Keep your head and, as always when investing, take the long-term view. External factors such as coronavirus or Brexit will present challenges in the short-term, but the long-term outlook remains strong.
Finally, keep an eye on your currency. Whenever currency fluctuations favour foreign buyers, you can bet that demand will increase, as they act to secure what is essentially a discounted property.
Our Time Has Come
Alyssa Ayres, Oxford University Press
Company profile
Name: One Good Thing
Founders: Bridgett Lau and Micheal Cooke
Based in: Dubai
Sector: e-commerce
Size: 5 employees
Stage: Looking for seed funding
Investors: Self-funded and seeking external investors
