• The preposterous and meteoric rise of NFTs, or non-fungible tokens, is just the latest symptom of a much larger trend plaguing the modern economy: the quick and irrational pursuit of enormous profits.
• From Sydney property and Afterpay to contemporary art and Bitcoin, NFTs are simply the latest iteration of a much larger phenomenon.
• This is an opinion column. The thoughts expressed are those of the author.
• Visit Business Insider Australia’s homepage for more stories.

Every year, the so-called free market becomes even more absurd.

It’s only April and 2021 is already doomed to be ‘The Year of the NFT’, as every Tom, Dick, and Harry rushes to buy digital nothing, the world’s new favourite commodity.

For anyone who doesn’t really understand NFTs (read: almost everyone), it essentially boils down to putting something digital on the blockchain and selling ownership of it – sometimes for huge sums of money.

See what I mean? Absolutely meaningless. And yet, a highly lucrative market has emerged.

A few weeks ago, multiple people competed to hand over $US69 million ($90 million) for a digital collage that anyone with an Internet connection can enjoy. Later the artist, quite reasonably and a little nonchalantly, suggested that most NFTs “will absolutely go to zero”.

The ready declaration by its creators that the whole thing is digital snake oil actually seems to be the one saving grace of NFTs.

Australian producer Flume summarised his $66,000 windfall last month as “kind of ridiculous”. Meme creator Brown Cardigan, who sold a brown square for nearly $1,400, was closer to the mark still when he simply called it “dumb shit”.

The phenomenon is close to home

The most baffling part of the whole trend is the fact that anyone is surprised that this is where we’ve ended up. This year was unfortunately not the first in which we gleefully deluded ourselves that nothing is worth something, as if having entered a strange Orwellian universe.

If you want a textbook example of shared psychosis, you need take just one look at the Australian property market. At this point, it feels like Sydney real estate agents have been flogging multimillion dollar dumps my entire adult life.

We’re talking about dilapidated asbestos-filled wrecks described by cheap suits as “tired” or being full of “pure potential” (sic). You see synonyms such as “a threat to public health and safety” far less.

Name another time and place in history where a person would be content to spend 30 times the average salary for a condemned shed. You can’t do it – and yet visit an auction this weekend and you’ll find hordes of people competing for such an honour.

It’s a national perversion that makes tulip mania seem like your Nan’s knitting circle, and it is but one example of a phenomenon we’ve all succumbed to.

Everything is about cash money

The fact is you could cut the NFT story 66 million different ways but it comes down to one simple reality: we will all indulge the irrational as long as there’s a payoff at the end.

Even the most ardent crypto bro has to admit that the market can get a bit ridiculous. You would have to, considering terms like ‘shitcoins’ are part of the lexicon and one of the most well known cryptocurrencies in the world, thanks to Elon Musk, is based on a meme.

But this isn’t a tirade against digital assets in general. Rather, this is about the fact that the vast majority of the people who deal in them are in it for the coin – the regular old fiat variety, to be clear.

Any business 101 class will teach you value and price aren’t synonymous. Yet Afterpay, the glorified digital lay-by company, has surpassed a $34 billion market cap. That makes it ‘worth’ more than Coles – the company that employs 100,000 people and indirectly feeds a quarter of the country.

The fact is that just because something has no inherent worth doesn’t mean it is worthless, per se.

Whether it is digital land, a hovel in Surry Hills, a $US120,000 piece of fruit ‘art’, or a digital JPEG, all are being driven by exactly the same thing. And that is the belief that whatever price we pay for it today will be greatly surpassed by someone else tomorrow. Much like a giant pyramid scheme, people know it pays to get in early.

This dynamic also explains why the party is far from over. Like the Australian property market, an abject fear of missing out will prove to be the ultimate market accelerant.

Which brings us in a roundabout way to the lesson from all this. Right now it only matters which way the wind is blowing and what Elon is tweeting.

Who knows if, or when, our group delusion will ever end. But right now, the line is going up and everybody is buying. In a world full of money printers, these veritable Ponzi schemes are priceless.

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