Are NFTs really back? News articles shout that floor prices are up, and trading volume is through the roof. GameSquare is dropping millions on CryptoPunks. Even EtherRocks are making a comeback. It feels like 2021 all over again. Hold on a second before you FOMO into the next Bored Ape—we need to pump the brakes. Hard.

Underneath the glittery graphics of what many are calling an NFT renaissance, uncomfortable realities lurk. Unfortunately, there’s no appetite to admit their shortcoming. These aren’t just pesky nuisances, they’re gaping holes in the plan that would have the potential to crash this fragile, tentative market back down to earth. I'm not saying NFTs are dead. What I’m advocating for is realism.

Liquidity Is Still A Mirage

Okay, CryptoPunks are hot again. Pudgy Penguins are waddling their way back into the spotlight with their latest collaboration. Moonbirds are... well, still birds. When it comes to the other 99.9% of NFT projects, the overwhelming majority of NFTs stay depressingly illiquid.

Think about it. You purchase an awesome NFT that looks nifty for 0.5 ETH with plans to sell it later for profit on the bounce. But turn around and try to sell something, and you’ll be talking to crickets. Why? Because nobody wants it. The demand simply isn't there. Outside of a small number of NFT collections considered “blue-chip,” the NFT market has experienced a drought.

This isn't just a problem for flippers. It's a systemic risk. Imagine a widespread market downturn. In an instant, everybody is running for the doors, grifting to sell off their NFTs. But there aren't enough buyers. Prices plummet. People get wrecked. It's a fire sale waiting to happen.

We need to be honest with ourselves: most NFTs are not liquid assets. They're speculative collectibles with limited real-world utility. Treating them like easily-tradable commodities is a disaster in the making. Don't get caught holding the bag.

Wealth Is Dangerously Concentrated

The inequities in the NFT market NFT art has always been under the dark shadow of wealth concentration. Only a few whales hold a vastly outsized percentage of the assets. This is a perfect recipe for a market that can be easily manipulated.

You might recall that big wallet sweep of 45 CryptoPunks for almost $8 million. That's a massive power move. It immediately raised the floor price, creating a tidal wave of hype and FOMO. Who benefited the most? The same person who previously owned half of all CryptoPunks.

This isn't just about individual whales. Now, corporations like GameSquare are jumping on the bandwagon, treating NFTs as corporate treasury assets. They’re accumulating tens of millions of dollars worth of NFTs and figuring out how they can yield on their collections. Though this may seem like the most creative solution, it ironically centralizes even more authority with a handful of powerful players.

The issue with wealth concentration isn’t that innovators shouldn’t be rewarded, but that it squashes competition and tilts the set of rules. This is detrimental to small creators and collectors. Then the market falls dangerously into the hands of a small few powerful actors who can set the price and control the story. That’s a recipe for an unhealthy, unsustainable ecosystem. It’s a recipe for a handful of people to get extremely wealthy off the backs of everyone else. Think of it like this: It's like a game of Monopoly where one player starts with all the properties. Everyone else is just playing to lose.

NFTFi Is A House Of Cards

NFTFi – the intersection of NFTs and decentralized finance – is the new hotness in the crypto space. Platforms are rehypothecating PFPs, collections are releasing fungible tokens, and everyone is scrambling to find ways to “unlock the utility” of their NFTs.

NFTFi is nothing more than a house on a foundation of sand. It’s a very complex web of interlocking protocols and financial instruments, all predicated on the value of NFTs. As we’ve all learned by now, the value of most NFTs is extremely speculative and illiquid.

What happens when the market crashes? What if NFTs lose all their value overnight? Without that basic layer of trust and protocol, the whole NFTFi ecosystem would fall apart like a house of cards. Loans would be automatically liquidated. Protocols would risk becoming technically insolvent and buggy. People would lose their shirts.

The yield generation promise on your NFTs is tempting though. It's incredibly risky. You’re just gambling that the market goes up for all time. And as we all know, markets are never always up. Especially not in crypto.

Second, the ethical implications of some NFTFi practices are alarming. The Tornado Cash trial, based on dubious evidence and possible prosecutorial overreach, underscores the risks of too-intense regulation of decentralized finance. As much as preventing bad activity is important, we need to ensure that in the name of preventing that bad we don’t kill innovation and freedom along the way.

I get what’s bringing them there, I get the siren call of runaway profits and the lure of a tech boom comeback. Let's not get carried away. Let's be honest about the risks. Let’s get ready to answer the hard truth that no one wants to hear. The future of NFTs depends on it.

I understand the allure of profits and the excitement of a potential resurgence. But let's not get carried away. Let's be honest about the risks. Let's acknowledge the uncomfortable truths that nobody wants to talk about. The future of NFTs depends on it.