Non-fungible tokens (NFTs) are extremely popular right now. Similar to cryptocurrencies, the price of these rare digital pictures can soar, with some fetching collectors hundreds or even huge amounts of money. Rareness isn’t all in this digital economy, even if rarer NFTs often become considerably more valuable, according to a recent study. The value of uncommon NFTs can literally be destroyed by the sheer amount of desire for them.
NFTs are rising in popularity
Cognitive scientist at Stevens Institute of Technology Jordan Suchow said, “Because NFT trading records are public, they offer a remarkable chance for us to look at why people perceive certain things as valuable, and how those changes over time.”
The team in this study looked at a collection of NFTs known as the “Bored Ape Yacht Club.” This NFT set features 10,000 machine-generated cartoon ape graphics, much like a stamp series, each with a unique accessory, outfit, and fur color.
Interestingly the more distinctive the Bored Ape is, the rarer it becomes. Apes that are more widespread are worth less on the NFT exchanges. It is similar to stamp collection, and Suchow explains that if there is a printing fault on a stamp or any other uncommon feature, it makes it stand out.
NFTs can surge in value quickly and lose faster
According to the study, as soon as the Bored Ape NFTs were released, the value of apes with the most uncommon qualities instantly increased, and each collector started seeking for them. However, those wanting to invest in these graphics found that this actually flopped.
Researchers discovered that when rarer NFTs increased in value and visibility, they effectively became more common. Suchow said that rarity could be self-defeating, and if someone wants to maintain value, one needs to ensure they don’t see the rarest items in a particular category.
The study demonstrates that some features of the NFTs lost value faster than others like for the ape, those with unusually colored backgrounds maintained value relative to others. On the other hand, those with different color fur lost value faster.