4 ms·

I don't follow how 0% interests rates caused the NFT boon. Does the author imply that if the interest rates fell back to 0% the NFTs would take off again? I ha

I don't follow how 0% interests rates caused the NFT boon. Does the author imply that if the interest rates fell back to 0% the NFTs would take off again? I have hard time believing that. Notably the author misses the main effect of 0% interest rates: cheap mortgages that drive up home prices.

anonymouskimmer 4y ago
I think the argument would be similar to that for the art market in general (which is cyclical): Low borrowing rates allow cheap speculation on NFTs. The artificial scarcity of particularly well marketed NFT "collections" means their value will appreciate. The NFT can itself be used as collateral for a loan. That new loan can be used to pay back the original loan used to buy the NFT in the first place. And since the boom is happening your NFT from the scarce and popular collection will continue appreciating in price. If you were smart and bought 10 NFTs from the exclusive collection you could pay off the original loan from the sale of, or a loan collateralized by, just one of the NFTs, giving you a net 9. Start factoring in tax write-offs or whatever and who knows. Now eventually this falls apart, but as long as loans are cheap people can keep this up for quite a while. It's quite amazing that someone spent half a billion dollars on even an original, "lost" da Vinci: https://luxe.digital/lifestyle/scene/most-expensive-paintings/ https://luxe.digital/lifestyle/scene/most-expensive-painting...
- glofish 4y ago
  I find the logic a bit strained, get a loan -> buy NFT -> sell NFT cycle was sustained by 1000% rises in the NFT prices, not by the 0% interest rates of the loans. Hence my incredulity towards the claim that 0% interest caused the NFT boom.
  - anonymouskimmer 4y ago
    No, it wouldn't be the cause, but it is probably a contributing factor. Lower loan rates increase the number of people who both are willing to risk taking out a loan to buy something on FOMO grounds, and who are offered the opportunity to take out a loan in the first place. Lower loan rates also allow easy access to the money needed for wash trades and the like that allowed NFT (and cryptocurrency) market manipulation.
  - vinyl7 4y ago
    Chicken or the egg? Maybe nft prices went up because people had a bunch of free money that they had nothing better to do with
yucky 4y ago
It seems pretty clear to me that the NFT boon was driven largely by the free COVID money people were given, combined with everyone trapped at home and bored.

anonymouskimmer 4y ago

I think the argument would be similar to that for the art market in general (which is cyclical): Low borrowing rates allow cheap speculation on NFTs. The artificial scarcity of particularly well marketed NFT "collections" means their value will appreciate. The NFT can itself be used as collateral for a loan. That new loan can be used to pay back the original loan used to buy the NFT in the first place. And since the boom is happening your NFT from the scarce and popular collection will continue appreciating in price. If you were smart and bought 10 NFTs from the exclusive collection you could pay off the original loan from the sale of, or a loan collateralized by, just one of the NFTs, giving you a net 9. Start factoring in tax write-offs or whatever and who knows. Now eventually this falls apart, but as long as loans are cheap people can keep this up for quite a while. It's quite amazing that someone spent half a billion dollars on even an original, "lost" da Vinci: https://luxe.digital/lifestyle/scene/most-expensive-paintings/ https://luxe.digital/lifestyle/scene/most-expensive-painting...

glofish 4y ago
I find the logic a bit strained, get a loan -> buy NFT -> sell NFT cycle was sustained by 1000% rises in the NFT prices, not by the 0% interest rates of the loans. Hence my incredulity towards the claim that 0% interest caused the NFT boom.
- anonymouskimmer 4y ago
  No, it wouldn't be the cause, but it is probably a contributing factor. Lower loan rates increase the number of people who both are willing to risk taking out a loan to buy something on FOMO grounds, and who are offered the opportunity to take out a loan in the first place. Lower loan rates also allow easy access to the money needed for wash trades and the like that allowed NFT (and cryptocurrency) market manipulation.
- vinyl7 4y ago
  Chicken or the egg? Maybe nft prices went up because people had a bunch of free money that they had nothing better to do with

yucky 4y ago

It seems pretty clear to me that the NFT boon was driven largely by the free COVID money people were given, combined with everyone trapped at home and bored.