Something bizarre happened this week when Duke Dumont dropped his debut collection on Nifty Gateway: only one person bought into an open edition piece, effectively turning what should have been a solid middle-tier open edition NFT into a unique 1 of 1.
The piece, Morganite, was a collaboration with LOREM in the DREAM LOGIC Open Collection. This stunning, subtle video loop was priced at $1,500, which marks it as a mid-to-high tier item by the pricing standards on Nifty Gateway in recent months. (The lucky buyer has now listed the piece for a cool $3,333.)
It's not clear exactly why only one edition sold. It's possible that buyers experienced technical issues when trying to check out - a dishearteningly common experience on Nifty Gateway.
But it's also possible that there was simply no demand for this NFT. My hunch is the latter.
(As a contributing circumstance, I would point to the fact that there was another open edition piece in the same collection that was extremely similar to Morganite, but priced $1,000 lower. That piece, Amethyst, sold only 9 editions. In my opinion, the pieces were not differentiated enough for most buyers to justify spending the extra 1k on Morganite.)
Malavida Stage 2 Drop Falls Flat
But Dumont is far from the only artist whose drops have been met with lackluster demand in recent weeks. Malavida, a celebrated NFT artist who had a successful previous release on Nifty Gateway, also released a drop this week that struggled to meet the expected demand. Her collection was called Onboarding — Heal The Deal Stage 2, and appeared to be only open to those who had purchased pieces from her first collection.
Each piece the Stage 2 main collection was released as a drawing, with four of the five pieces priced at $1,499 or higher. Despite selling 180 editions of her first drop, patrons of Stage 1 did not seem to take advantage of their exclusive access to stage 2: only 14 editions of the $1,499 piece were sold, and a combined 21 editions were sold of the 3 pieces priced at $1,900.
Now, those sale numbers, I would argue, are nothing to sneeze at. But what takes the shine off them is that the drawings for most of the above pieces were limited to 40 editions. Which means that even the best-selling piece in that collection only sold 8 pieces - a dismal 20% of the edition limit.
Perhaps this was as expected, and they just wanted to be safe and place an upper limit on the drawings. (I say 'they' as my understanding is that the artists work with Nifty Gateway to determine optimal pricing.) But in general, drawings have low limits, so that demand is much higher than supply, which ensures that it's exciting to actually win. I'm going to guess they were expecting more of the Stage 1 crew to follow through on this drop - much more.
This may have challenging implications for Stage 3 of the project, which will feature the ability for holders to combine their works into diptychs and triptychs. Hopefully, Stage 2 owners are aware of the privilege they purchased for what promises to be an interesting finale.
Trouble Across the Board
Judging by the conversation in various Discords and on Twitter, market watchers have noticed an unfortunate trend on Nifty Gateway in recent weeks - declining demand across the primary and secondary markets.
An informal survey of a variety of metrics - the number of open editions minted in recent drops; the number of drawings entered; the number of higher-priced pieces being snapped up; and the final sale price of auctions - suggests the money has stopped flowing from collectors at the generous rate it was in February and March.
There could be any number of reasons for the slowdown, and the niftysphere certainly is awash with theories. Many complain that Nifty Gateway has focused too much on quantity over quality, flooding the marketplace with big-name artists hawking expensive pieces, and middling-quality art. For all of the new blood entering the NFT space since the beginning of the year - and there have been many, many newcomers - NFTs remain an extremely niche market, and there are only so many collectors out there, with so many dollars. Market saturation is a real threat.
Panic in the Secondary Market
We're seeing demand drop not only in the primary market, but the secondary as well. A number of pieces that I have collected are now selling below their initial list price. This is a particularly ominous sign for pieces that were priced below what seems to be the market standard of $700 and up. If the affordable pieces can't keep their declared value, what does that say about the rest of the market?
On Twitter today, Duncan Cock Foster, one of the cofounders of Nifty Gateway, admitted that Nifty Gateway bears some responsibility for the current bearish situation, and implied they have hurt the health of the secondary market.
The NFT bubble of spring 2021 may be popping before our eyes. Here are some of the questions that come to my mind for me as we finally cross this inevitable threshhold into a more rational pricing environment on the best-known curated NFT platform.
Will this first wave of NFTs released on Nifty Gateway and other curated platforms hold their value long term?
Can NFT platforms continue to attract new buyers, and new dollars into the system in the short/medium future?
With Nifty Gateway tightening the tap on drops, do we see a renaissance of activity in the secondary market as collectors begin to trade for the pieces they actually want to hold long term?
Will we see an exodus of patrons as panicky buyers try to dump their holdings and flippers make their exit?