Some believe the breathtaking $69m NFT auction of a digital artwork, “The First 5000 Days”, is another sign that we are in the late stages of this Fed-fuelled, end-of-days bubble-to-end-all-bubbles. (We wrote about this earlier in the year.)
Watch the video of the artist Beeple (Mike Winkelmann) gather with his family as the auction progresses; it’s easy to see their charming, unbridled joy (“I’m going to Disney World!” he cries, perhaps ironically, as the hammer falls) as a symbol of much more harmful wild exuberance in financial markets everywhere.
We might be in a giant bubble; maybe it’s so big now we can’t even see it, like experimental subjects living inside a biosphere – or perhaps computer-generated simulations animating a virtual reality world. (Would we even have the capability to know if that were actually the case?)
I’m not commenting on NFTs per se. I’ve spent some time playing and learning – even minting my very own non-fungible token. (More on that at the end of this article.) Like so much in the crypto world, when you talk to enthusiasts you can come away thinking, “yeah! This is the future! I need to tell my kids about this or they’ll miss out!”
Later, while you are sat reading a book and glance out of the window at a magpie with a twig in its mouth perched at the top of the tall tree in the neighbour’s garden, the whole circus recedes into a bizarre, neopunk, netherworld dream that has no link to what you can know about the reality of existence.
Anyway. Let’s leave aside bubbles for a moment. Here’s my take: I think the sale of Beeple’s 5000 Days for $69m might just be the finest auction of all time.
Christie’s harnessed markets, marketing and motivation to deliver the perfect sale.
It was won by the individual with the greatest incentive to win.
That’s it. And that’s pretty much the way auctions are meant to work.
If I’ve learned one thing from Beeple, it’s that a picture paints a thousand words, right? So here goes:
Seems obvious in hindsight: the person with the strongest incentive to win the auction is a rich person who is not just into crypto, who owns not just any crypto business but one entirely based on NFTs.
Step forward Metakovan. Real identity “unknown” (sure, sure, sure). According to an interview given to Bloomberg, Metakovan is the founder of “a crypto-based fund that acquires NFTs and other virtual properties; it claims to be the largest NFT fund in the world”. He also owns a large collection of Beeple’s other works which have already been fractionalised and sold on for huge gains.
Metakovan said of his purchase, “I think this is going to be a billion-dollar piece” and, in relation to NFT investing in general, “there are going to be opportunities where people make money and people lose money.”
A merciless cynic might suggest this whole enterprise was to persuade ordinary folk to part with boring old fiat currency in exchange for crypto and then to swap that for NFTs – boosting the value of existing sought-after NFTs.
So, in short, the person with the greatest incentive to buy “First 5000 Days” won the auction. This is how auctions – and markets – are meant to work. Christie’s designed and executed this process to perfection.
Is $69m for a JPEG a sign of a monster bubble? It is certainly a sign of the times we live in.
I mentioned I’ve been exploring this space. Just for fun, I’ve turned my chart above into an animated NFT which you can buy yourself – limited edition of one – with all proceeds going to an environmental charity: