How can NFTs and Kanye West be alike, you ask? Well, it all starts with how they establish value.
Kanye’s Rise to Popularity
In 2010, Kanye rose to popularity levels unknown to the average man. He created arguably the greatest hip-hop album of all-time and started dating the “queen” of media, Kim Kardashian. Subsequently, all this fame and talent created one of the most profitable shoes that ever existed: the Yeezy.
The Yeezy and Rise of Sneaker Culture
Yeezys were part of an Adidas partnership with Kanye beginning as early as 2015. The sneakers cost around $75 to make and then were sold from the Adidas website at anywhere from $200-$350.
Flocks in their thousands would sit feverishly in virtual queues waiting for each colorway and style to be released. As they were already relatively expensive shoes, they still had ties to Kanye and celebrities, and the shoes would sell out in minutes, and then resold for over 500% of the retail price to $1000-$4000. This philosophy didn’t only apply to Yeezys, as for the next several years sneaker culture grew into a major business for both fashion and investments.
The Idea of Value
Kanye and the rise of sneaker culture poses the question, “What defines value?”. How can a pair of shoes, overpriced relative to the whole market, be worth over 5x their own retail value?
Well, it all revolves around trends, specifically hype, which “promote or publicize (a product or idea) intensively, often exaggerating its importance or benefits”. With celebrities and major influence increasing the popularity of sneakers, demand increases which cause prices to rise well over their intrinsic value.
Value in Non-Fungible Tokens
In 2022, this same question of value is posed to Non-Fungible Tokens (NFTs). NFTs are simply stored data that are associated with a unique asset such as art or digital media. They are stored on the blockchain and can be owned, sold, and traded across some platforms.
Just like sneakers, NFTs have grown to fame through hype, and have been promoted extensively by celebrities and “investor gurus” across the globe as being “the next big thing”. Unfortunately, NFTs lack one major thing: utility.
Lack of Utility and Worth for NFTs
NFTs are only worth what people would pay for them. They are fairly cheap to mint, don’t generate sales, and don’t benefit the owner in any way aside from a right to ownership. Although also overvalued, Kanye’s Yeezys and other overpriced sneakers have at least some utility; Yeezys cost $75 to make and you can wear them for fashion or fitness.
As investor sentiment and the hype surrounding NFTs have lost steam, their worth goes with it. With lack of intrinsic value or utility to them, they rely solely on trends. This means they can go from a 40 billion dollar industry to a free copy-and-paste in a matter of seconds.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.