The downfall of crypto companies like FTX has not only depressed the cryptocurrency market, but raised questions about the once-thriving market for non-fungible tokens (NFTs).
The Bored Ape Yacht Club (BAYC), a collection of 10,000 NFTs made up of varying digital monkeys, were perhaps the most emblematic symbol of last year’s NFT boom. “It attracted the most attention from the media,” said Andrea Baronchelli, a professor at City University of London who studies crypto and NFTs. “It exploded due to the movements of several celebrities, it was seen as a status symbol.”
However, in December, the celebrities behind BAYC promotions were sued for allegedly artificially inflating the value of the NFTs. Stars like Justin Bieber, Madonna and Paris Hilton were named in the suit, which claimed influential figures were secretly paid to advertise the collection through misleading promotions.
The investment value of the BAYC collection has also taken a hit in the past few months. In December, there were $76 million of Bored Ape NFT sales on the second-hand market, compared to a peak of $346 million in January 2022, according to Crypto Slam, an NFT aggregator that publishes sales data. During that time, the average sale of an NFT from the collection fell from $238,000 to $86,000.
The downfall of FTX and other crypto companies has not only weighed against NFT sales, but led to heightened regulation, according to Merav Ozair, a blockchain expert and fintech professor at Wake Forest University. The U.S. Securities and Exchange Commission (SEC) is reportedly in the midst of investigating Yuga Labs, which owns Bored Ape Yacht Club, over whether its offering of digital assets violates federal laws. It’s also examining ApeCoin, a cryptocurrency given to holders of BAYC NFTs. “Regulation is coming to the crypto market, and NFTs are no exception,” said Ozair.
Yuga Labs, a Miami-based company, is additionally in the midst of a dispute concerning trademark and copyright