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Just a year ago, Washington DC\u2019s Hirshhorn art museum \u2013 the capital\u2019s preeminent contemporary art museum \u2013 was asking whether non-fungible tokens (NFTs) were \u201cfad or the future of art\u201d<\/a>. Twelve months on, it looks like \u201ctax write-off\u201d might have been the right answer.<\/p>\n This year was not just the year that cryptocurrency values were burned by investor fears, rising interest rates, inflation and scandals<\/a>, it was the year that crypto\u2019s cartoonish art cousin the NFT \u2013 an electronic identifier confirming a digital collectible is real \u2013 collided with reality.<\/p>\n In March 2021, Christie\u2019s sold a digital collage NFT by the artist Beeple for nearly $70m (\u00a358m)<\/a>. In January pop star Justin Bieber paid $1.29m (\u00a31m) for a \u201cBored Ape\u201d NFT, a graphic of a, well, bored ape. Everyone from Michael Jordan to former first lady Melania Trump was in on the game.<\/p>\n Now \u2013 alongside the broader crypto market \u2013 the appetite for NFTs is so diminished that a specialized market has sprung up for collectors looking to sell off their once-valuable \u201cdigital collectibles\u201d as tax losses to offset their income tax bills.<\/p>\n A recently launched service, Unsellable<\/a>, aims to help collectors do exactly that. Think of it as a distressed asset fire sale.<\/p>\n \u201cWhile every investment class has its losers, many of the NFTs we invested in were not only down big; they were now totally worthless \u2026 illiquid \u2026 unsellable,\u201d the service says on its website.<\/p>\n Unsellable \u2013 which says it is \u201cbuilding the world\u2019s largest collection of worthless NFTs\u201d \u2013 buys the underlying tokens for a fraction of their original price and provides an official receipt for tax purposes.<\/p>\n The company then collects the NFTs into \u201cThe Unsellable Collection\u201d \u2013 currently containing 1,600 digital collectibles \u2013 with the aim of creating the \u201cultimate artifact of the early days of Web3\u201d.<\/p>\n It\u2019s easy to see why buyers may be keen to sell for a fraction of their original investment. Demand for digital certificates of ownership that underlie NFTs has evaporated. More than $19bn (\u00a316bn) was spent on NFTs between January and March 2022. Since then, according to blockchain analysis firm Chainalysis, monthly spending has dropped by 87%.<\/p>\n Just $442m (\u00a3368m) was spent in November, and the number of active NFT traders is down around two-thirds from its peak a year ago. According to the Nonfungible.com market tracker<\/a>, 144,000 NFTs were sold for $142m (\u00a3118m) on 16 January 2022. This Wednesday, there were 17,000 sales for $28,000 (\u00a323,294).<\/p>\n The most traded collection of NFTs are images from the Bored Ape Yacht Club<\/a> (BAYC), like the one Bieber bought. Each Bored Ape image features a unique combination of 170 possible traits, including expression, headwear, clothing and more. \u201cAll apes are dope, but some are rarer than others,\u201d the company says.<\/p>\n Yuga Labs, the company behind Bored Ape, was recently hit with a class-action lawsuit claiming it had unrealistically hyped the value of its intangible goods. The lawsuit named celebrities<\/a> \u2013 and former NFT evangelists \u2013 including Bieber, Paris Hilton, Madonna, Jimmy Fallon and Kevin Hart, as co-defendants.<\/p>\n \u201cDefendants\u2019 promotional campaign was wildly successful, generating billions of dollars in sales and re-sales,\u201d the lawsuit, filed on 8 December in a district court in California, said.<\/p>\n \u201cThe manufactured celebrity endorsements and misleading promotions regarding the launch of an entire BAYC ecosystem (the so-called Otherside metaverse) were able to artificially increase the interest in and price of the BAYC NFTs during the relevant period, causing investors to purchase these losing investments at drastically inflated prices.\u201d<\/p>\n The NFT market is a long way from where it sat in October 2021, when Mike Winkelmann \u2013 the digital artist known as Beeple \u2013 sold his work at Christie\u2019s, making him \u201camong the top three most valuable living artists\u201d.<\/p>\n Last week, Winkelmann remained upbeat about the internet\u2019s place in creating art, but he conceded<\/a>: \u201cThe market is a bit crap right now,\u201d he told Bloomberg. \u201cDo I think it\u2019s going to go back to where it was? I don\u2019t know \u2026 I definitely think it\u2019s going to go up from here.\u201d<\/p>\n And one former celebrity, and US president, agrees. Earlier this month Donald Trump launched a collection of digital collectibles<\/a> depicting him as, among other things, an astronaut, a cowboy and a superhero. It sold out in less than a day.<\/p>\n<\/div>\n