The new service offers a way to offset losses from NFTs during a dismal crypto winter that saw demand for digital collectibles disappear
A year ago, Washington DC's Hirshhorn art museum - the capital's leading contemporary art museum - asked whether non-fungible tokens (NFTs) were "the fad or the future of art". Twelve months later, it looks like "tax relief" might be the right answer.
This year was not only the year cryptocurrencies were burned by investor fears, rising interest rates, inflation and scandals, it was the year the cartoon art of the crypto cousins of NFTs – the electronic identifiers that confirm digital collections are real – collided with reality. In March 2021, Christie's sold artist Beeple's digital NFT collages for nearly $70 million (£58 million). In January, pop star Justin Bieber paid $1.29m (£1m) to NFT "Bored Ape", a picture of a bored ape. Everyone from Michael Jordan to former first lady Melania Trump got in on the game.
Now - alongside the broader crypto market - the appetite for NFTs has dwindled so much that a niche market has sprung up for collectors looking to sell their once valuable "digital collectibles" as a tax loss to offset their income tax bill.
Newly launched service Unsellable aims to help collectors do just that. Think of it as a fire sale of distressed assets.
“While every investment class has losers, many of the NFTs we invest in don't just go down big; they are now completely worthless… illiquid… unsaleable,” the service says on its website.
Unsellable – which is said to be “building the world's largest collection of worthless NFTs” – buys the underlying tokens for a fraction of their original price and provides an official receipt for tax purposes.
The company then pooled the NFTs into “The Unsellable Collection” – currently containing 1,600 digital collections – with the aim of creating the “ultimate artifact of the early days of Web3”.
It's easy to see why buyers would be interested in selling for a fraction of their initial investment. The demand for the digital title certificates that underlie NFTs has evaporated. Over $19 billion (£16 billion) was spent on NFTs between January and March 2022. Since then, according to blockchain analysis firm Chainalysis, monthly spending has fallen by 87%.
Only $442 million (£368 million) was spent in November, and the number of active NFT traders is down by about two-thirds from last year's peak. According to market tracker Nonfungible.com, 144,000 NFTs sold for $142m (£118m) on 16 January 2022. This Wednesday, there were 17,000 sales for $28,000 (£23,294).
The most heavily traded NFT collection is an image from the Bored Ape Yacht Club (BAYC), such as the one Bieber purchased. Each Bored Monkey picture features a unique combination of 170 possible traits, including expressions, headwear, clothing and more. "All macaques are dope, but some are less common than others," the company said.
Yuga Labs, the company behind Bored Ape, was recently hit by a class action lawsuit claiming to have unrealistically inflated the value of its intangibles. The lawsuit names celebrities - and former NFT evangelists - including Bieber, Paris Hilton, Madonna, Jimmy Fallon and Kevin Hart, as co-defendants.
"Defendant's promotional campaign was extremely successful, generating billions of dollars in sales and resale," says the lawsuit filed Dec. 8 in district court in California. the entire BAYC ecosystem (which is called the Metaverse Otherside) may artificially inflate the interest and price of BAYC NFTs over the relevant period, causing investors to purchase these losing investments at drastically inflated prices.”
The NFT market is still far from where it was in October 2021, when Mike Winkelmann – the digital artist known as Beeple – sold his work at Christie's, making him "among the three most valuable living artists".
Last week, Winkelmann remained optimistic about the internet's place in creating art, but he admitted: "The market right now is kind of ugly," he told Bloomberg. “Do I think it will go back to where it was? I don't know… I definitely think it will go up from here.
And a former celebrity, and US president, agrees. Earlier this month Donald Trump unveiled a collection of digital collectibles depicting himself as, among other things, an astronaut, cowboy and superhero. It sold out in less than a day.