NFT Bubble 2021‑2026: Rise, Collapse, and Lessons for Web3

Apr 20, 2026

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2 min read

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In 2021 the NFT market exploded, with trading volume jumping from $82 million in 2020 to $17.6 billion the following year—a 21,000 % increase. Celebrities such as Jimmy Fallon, Snoop Dog g and Justin Bieber endorsed NFTs, turning them into cultural touchstones. The technology promised digital scarcity, letting artists certify authenticity, retain control, and earn royalties on every resale. Early pioneers like Kevin McCoy, Anil Dash and the Beeple JPEG, which sold for $69.3 million in March 2021, embodied this vision.

The Mechanics of the Bubble

The hype turned into a speculative frenzy. The Bored Ape Yacht Club functioned more as a private club and status badge than as pure artwork, feeding the “Greater Fool” mindset where buyers hoped to sell to someone willing to pay more. Institutional players and brands, including BlackRock and Franklin Templeton, entered the space, lending an air of legitimacy.

A critical distortion came from wash trading. Owners moved NFTs between wallets they controlled, recording each transfer as a sale. Because blockchain ledgers count every transfer as trade volume, platforms reported inflated activity—sometimes as much as 95 % of volume was self‑dealing. This artificial demand convinced investors that the market was thriving, while real buyer interest remained thin.

The Collapse

By 2024‑2026 the bubble burst. Trading volume fell 93 % after the 2022 crash, and 96 % of NFT projects showed no value. Major auction houses such as Christie’s and Sotheby’s shuttered their digital‑art departments or laid off staff. High‑profile lawsuits emerged, including a $5 million suit against Nike’s RTFKT unit and settlements involving Shaquille O’Neal. The object for sale proved only as valuable as a buyer’s willingness to pay, and that willingness evaporated when collective belief waned.

Future Outlook

Even as the NFT mania collapsed, blockchain ownership found new purpose. Real‑world asset tokenization—covering property, credit and commodities—reached a $30 billion market by Q3 2025, driven by institutions like BlackRock. Web3 gaming also shows promise for genuine utility beyond speculative art. The speaker draws a parallel between the NFT frenzy and today’s enthusiasm for large language models (LLMs), warning that shared psychosis can inflate valuations before technology’s practical limits surface.

Reflections on Market Psychology

Human greed and speculation turned digital certificates into status symbols, creating a “shared psychosis” where ownership mattered only because enough people agreed it did. When that agreement dissolved, the market collapsed. The episode underscores that technology alone does not guarantee value; collective belief and transparent mechanisms are essential for sustainable growth.

Takeaways

NFT trading volume exploded from $82 million in 2020 to $17.6 billion in 2021, driven by celebrity hype and the promise of digital scarcity for artists.
Wash trading inflated reported activity, with up to 95 % of volume on some platforms generated by owners selling to themselves, creating a false sense of demand.
The “Greater Fool” mentality turned collections like Bored Ape Yacht Club into status symbols, encouraging rapid buying and selling cycles that collapsed when confidence evaporated.
By 2024‑2026, 96 % of NFT projects held no value, leading auction houses such as Christie’s and Sotheby’s to shut down digital art departments and prompting high‑profile lawsuits.
Tokenization of real‑world assets has grown to a $30 billion market by Q3 2025, suggesting that blockchain’s utility may survive the NFT mania and could parallel current enthusiasm for AI models.

Frequently Asked Questions

How did wash trading distort NFT market volume?

Wash trading involved owners moving NFTs between wallets they control, recording each transaction as a sale. Because blockchain records treat each transfer as a trade, the volume metric rose dramatically while no new buyers entered. This artificial activity misled investors about demand, inflating prices until the illusion collapsed.

What parallels are drawn between NFT hype and current AI/LLM enthusiasm?

The speaker compares the NFT frenzy to today’s hype around large language models, noting that both rely on a shared belief in transformative potential that outpaces practical utility. In each case, speculative capital rushes in, creating inflated valuations that risk collapsing once the technology’s real‑world limitations become evident.

Does this page include the full transcript of the video?

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Helpful resources related to this video

If you want to practice or explore the concepts discussed in the video, these commonly used tools may help.

Books On Market Bubbles And Speculation Recommended

Provides historical context on financial manias and market psychology, helping the reader understand the patterns behind the NFT bubble.

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Books On Behavioral Finance And Investing

Explains the psychological biases and human behaviors that drive asset prices to unsustainable levels, mirroring the NFT mania.

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Hardware Wallet For Secure Crypto Storage

A physical device used to securely store digital assets, relevant for those interested in the underlying blockchain technology mentioned in the podcast.

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Full Transcript YouTube

Hi, welcome to another episode of Cold
Fusion.
When future historians study the year
2021, they'd note a few interesting
things. They'd observe that we were all
stuck in our homes with nothing to do.
Stimulus checks were raining from the
sky and speculation on financial assets
were off the charts. But when they look
at March of 2021, the historians would
first be confused and then shocked
because Christy's auction house, one of
the oldest in the world, had just sold
something intangible for a whopping
$69.3 million. It wasn't anything you
could hold in your hands or hang on a
wall. It was a digital image, a JPEG
file by an artist named People. In the
same month, an image of the first tweet
from Jack Dorsey, the founder of
Twitter, sold for $2.9 million. These
are of course stories of the great NFT
bubble. Now forget the historians. Even
for us looking back, this is hard to
believe. But for a short couple of
years, the hype was very real. Jimmy
Fallon, Snoop Dogg, Paris Hilton, Louis
Vuitton, YouTube, and the University of
California, Berkeley all got sucked into
the delusion of NFTts or just wanted a
quick buck. And the numbers were unlike
anything the art world or the internet
had ever seen. By the end of 2021, NFT
trading volume had ballooned to around
17.6 billion, up from just 82 million a
year before. That's a 21,000%
increase in just one year. But these
would be the dying months of the NFT
craze. Soon, it would all fall apart.
That same people JPEG that sold for $69
million is now reportedly worth around
$2,300.
And that Jack Dorsey tweet that sold for
$2.9 million was last valued at $280.
That's a 99.9% loss. Those viral board
ape NFTts that celebrities paid hundreds
of thousands of dollars for are barely
moving for a fraction of that. This all
paints a graphic picture, a catastrophic
collapse in value. The NFT platforms are
now shutting down. The auction houses
quickly packed up their NFT departments
and some of the celebrities who promoted
these things are now facing lawsuits.
According to some studies, it's likely
that 95% of NFT art has no value at all.
But even after the disaster, some
advocates insist that the underlying
technology still has important uses, and
they dream that it may yet rise from the
ashes. But could this be a possibility?
The rise and fall of NFTTS tells us
something special about human
psychology. It's also a lesson in the
fundamentals of markets and how value is
determined. And besides, it's a great
story for a little laugh. a time where
the world went crazy over JPEGs. So,
what exactly happened here? And was
there ever anything real underneath all
the hype? Come on, let's take a look.
You are watching Told Fusion TV.
This is Neon Cat. He's part cat, part
Pop-Tart. The gift of a rainbow casting
feline was a viral meme back in 2011.
Fast forward to February 2021. The
original gift was sold at an online
auction for 300 Ether, the
cryptocurrency that powers the Ethereum
network. That was equivalent to nearly
$600,000 at the time. You may be asking
how someone can own the original copy of
a gift that was pervasive around the
internet. It's because it was sold as an
NFT or nonfgeable token, which acts like
a digital certificate of authenticity.
An NFT or nonfgeible token is
essentially a certificate of ownership
recorded on a blockchain. You're not
buying the asset itself, whether that be
an image or anything else. You're buying
a digital record that says you own it.
Think of it like buying a deed to a
house. The house still exists. Anyone
can drive past and take a photo, but
only one person holds the deed. Despite
how out of control the NFT space would
get, the original concept came from a
good place. In May of 2014, two guys, an
artist Kevin McCoy and a tech
entrepreneur Anel Dash, decided to
digitize works of art while at a New
York City hackathon. Here's Anil talking
about it in 2021 in a perfectly titled
piece called NFTts weren't supposed to
end like this. Quote, "The only thing we
wanted to do was to ensure that artists
could make money and have control over
their work." End quote. For digital art,
that was genuinely a new idea. A
painting is one of a kind by nature. A
digital file, however, is the opposite.
Anyone can copy it, download it,
screenshot it. NFTs offered for the
first time a technological answer to
that problem. And for a lot of artists,
the timing felt like a lifeline. I'll
share a few world examples of how NFTs
made some artists rich later in the
episode. Now, on Cold Fusion, we
regularly cover cuttingedge tech, but
one part of technology that's becoming
ever more important is software. That's
why we've partnered with our sponsor
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annual plan. Big thanks to boot.dev for
supporting Coldfusion. Now, back to the
story.
From 2018 to 2021, there was a meteoric
rise. The advocate said NFTts would
revolutionize art and ordinary people
could become millionaires in months. And
for a while, this seemed true. Artist
Tyler Hobbes put up 999 pieces and
cleared them almost instantly for nearly
$400,000 in Ethereum. One thing that
made the idea of NFT so powerful for
artists is that if a buyer sold it to
someone else, the original artist will
still receive a percentage of the
royalties. So, in Tyler's case,
secondary royalties pushed his value up
to $9 million.
An 18-year-old designing logos on
Discord for pocket money minted one
cartoon that ended up clearing his
family's mortgage and car debt. One UCLA
digital arts graduate quit his day job
after his first NFT sales, telling
reporters that it was the best thing
that ever happened to him. Meanwhile,
famed British conceptual artist Damian
Hurst went off the deep end. He created
NFTts for thousands of his paintings.
Then he burned the originals. I'm not
burning my art, he proudly declared. I'm
transforming it into NFTTS. Stories like
this spread fast and in no time it was a
case of monkey see monkey do. I want to
get rich too. So as these things always
go, money has a way of attracting a very
different crowd once the stories get big
enough. When the celebrities started
endorsing and promoting, the hype went
to the stratosphere. Paris Hilton, who
had been in the space since 2020, went
on to launch multiple collections of her
own.
>> Since then, Forbes has named you one of
the 50 top uh 50 most influential people
in the NFT space. So, congrats on that.
You know what you're doing.
>> Thank you. I'm so proud. I love being
part of this community and being a voice
and sharing my platform and just getting
the word out there cuz I think it's just
such an incredible thing to be a part
of.
>> Yeah, I jumped in.
>> I know. I heard. I'm so happy I taught
you what they were.
>> You did. You taught me what's up and
then I bought an ape.
>> I got an ape, too, because I saw you on
the show with people and you said you
got a moon. So, I went and I copied you
and did the same thing.
>> You did?
>> Mhm.
>> This is your This is your ape. We
>> debuted. That's really cool.
>> Like the hat, the shades.
>> Now, what
>> celebrities were going around on
national television showing off cartoon
apes that they'd paid hundreds of
thousands of dollars for. Other big
names like Eminem, Snoop Dogg, Steph
Curry, and Serena Williams all took the
plunge. By this stage, it was clear that
something had shifted. It definitely had
stopped being about the art and was just
another way to make a boatload of money.
But some others viewed NFT trading as a
community. That's exactly what the board
apach club was built for. It was
launched in April of 2021. 10,000
algorithmically generated cartoon apes
were sold for eyewatering amounts. But
the product being sold wasn't really the
image. There was a membership, a private
club, exclusive IRL events, a members
only Discord, and a very public signal
that you had arrived. Justin Bieber paid
around $1.3 million for his. The status
symbol had a price tag that anyone could
look up, which was sort of the whole
point. Global brands were watching this
closely, and they started jumping in to
get in on the action. Nike acquired a
virtual sneaker company, RTFKT, in late
2021. Adidas launched its own
collection. At one point, even Charm and
Toilet Paper was selling NFTts, and that
probably should have been a warning
sign. So anyway, NFT trading volume went
from 82 million in 2020 to 17.6 billion
in 2021. And that kind of growth almost
always means one thing, a massive
bubble.
>> What the hell's an NFT? Apparently
cryptocurrency. Everyone's making so
much money. Can you please explain
what's an NFT? Anil Dash, one of the
creators of the NFT, looked on in horror
solemnly. He noted in 2021, quote,
"Nothing went the way it was supposed
to." End quote. So, at this stage,
people believed in the technology and
the demand. It looked real. So, what
went wrong? Let's begin with that sale
that started it all. The buyer of that
$69.3 million people image was a
Singapore-based crypto investor who went
by the pseudonym Metakovven.
Bele himself seemed to know that the
market was shaky. As reported by
Bloomberg just days after the sale, he
went on Fox News and said it directly.
Quote, I absolutely think it's a bubble.
To be quite honest, I go back to the
analogy of the beginning of the
internet. There was a bubble and the
bubble burst. End quote. The $69 million
sale was far from the only problem. Wash
trading was rampant across the whole
market. And the concept is
straightforward. You sell an NFT to
yourself at an inflated price using two
wallets. Anyone checking the history
assumes that that's what the market
thinks it's worth. As reported by
Bloomberg, on one marketplace called
Looks Rare, Wash Trading accounted for
$18 billion. Roughly 95% of its reported
trading volume. So, a significant chunk
of the numbers that made the NFT market
look enormous were in a very literal
sense made up.
As the bubble was growing, many critics,
myself included back then, were asking
themselves, "What is the true value of
an NFT?" The NFT basically gave you a
receipt, not the file and not the
copyright. If you don't own the rights,
what are you really buying? Yes, you
bought a JPEG, so at first glance, the
value of that should be zero. It's
simply enough for anyone to copy and
paste that image and view it for free
and have the same viewing experience as
the person who paid millions of dollars
for it. But others would argue that it's
more than just an image. It's digitizing
the very concept of ownership. Whoever
bought the NFT has verifiable ownership
on the blockchain. So ownership was the
real value. But there's a problem there.
Even if this was valuable, early on in
the NFT hype cycle, questions were being
raised about this. How do you know that
the original seller of an NFT is
actually representing the real artist?
What if that owner on the blockchain is
not, you know, the real owner? In 2018,
Terrence Eden proved this point. He
managed to put himself as the owner of
the Mona Lisa on the blockchain. It was
verified by Verestart, a blockchain art
certifier. Although quickly resolved,
the stunt proved a point. Ownership only
meant something if everyone agreed it
did, and eventually enough people
stopped agreeing. As time progressed,
the value of NFTts kept falling. And it
turns out that the value of that
blockchain ownership for art was almost
zero as well. Buyers didn't know at the
time, but the hype machine was about to
run out of steam.
The collapse happened the way that most
bubbles deflate. Gradually at first,
then suddenly in May of 2022, daily NFT
sales had dropped 92% from the September
2021 peak. Active wallets had fallen
88%. From 119,000 down to around 14,000.
The buyers dried up. The flippers
stopped flipping. And the collections
that had commanded hundreds of thousands
of dollars started sitting unsold.
Remember Justin Bieber paying $1.3
million for his Board Ape? By early
2026, that same NFT was worth around
$12,000.
The board ape yacht club, once the
symbol of the whole movement, had a
floor price of around $429,000 at its
peak. By 2025, it had now fallen to
around $27,000, wiping out roughly 93%
of its value. The wider data of the
market overall was equally stark. NFT
trading volumes collapsed by 93%.
A 2024 report found that 96% of NFT
projects were effectively dead. The
average lifespan just over a year. The
institutions quietly started backing
out. Christy's auction house, that
outfit that sold the Bele NFT, admitted
defeat and closed their digital arts
department in September of 2025.
Another auction house, Sophies, laid off
most of its NFT team in 2024.
In early 2026, Nifty Gateway, one of the
original NFT marketplaces, shut down
entirely. At their peak, they moved over
300 million in sales. Then came the
lawsuits. Nike quietly shut down its
virtual sneaker NFT unit, RTFKT, in
December of 2024. Buyers sued for $5
million, accusing the company of hyping
up the project and then walking away.
They left buyers holding assets worth a
fraction of what they paid.
Other big names like Shaquille O'Neal
paid out 11 million plus attorneys fees
to buyers of his astral project NFTts.
And although Bitcoin and Ethereum have
rebounded in price since the crash of
2022, NFTTS never did. Now, stepping
back and looking at all of this
together, what you're seeing is a
complete unraveling. The celebrities are
gone, the brands pulled away, the
platforms vanished, and the money went
up in smoke.
The pattern was pretty consistent.
Generate excitement, take the money, and
leave. The people left holding the bag
were on their own.
So, is there anything left? Sort of.
Some argue that the speculation is now
gone, but the underlying technology
didn't disappear with it. And when you
look at where the serious money has
actually moved, there's something to
that. Real world asset tokenization is
the idea that's gained the most
traction. Instead of cartoon apes, the
idea is to tokenize assets that already
have real world value. Things like
property, private credit, or
commodities. By Q3 of 2025, that market
had crossed 30 billion with institutions
like Black Rockck and Franklin Templeton
actively involved.
Web 3 gaming is another space to be
watched here. NFTts could carry real
in-game utility rather than just a price
tag. So, we'll see. The honest take is
that the technology was real. The frenzy
that turned it into a $17 billion market
in a single year was never the
technology's fault. It was the fault of
human greed. Interestingly, while many
NFT companies died, companies like Louis
Vuitton, Disney, and the NBA do have
NFTs that are stable and selling well,
so the story may not be over. The NFT
boom was a perfect example of a fatal
flaw in financial markets. The object
for sale is only worth what a buyer is
willing to pay. If, for one reason or
another, the majority of buyers have
shared psychosis and become delusional,
they bid the prices higher and higher,
more people see that high price and they
want to make money, too. And in that you
have the beginnings of a bubble. For the
case of the NFT, it was clear that a
copy and pasteable image wasn't worth
hundreds of thousands of dollars, but
the prices sent the clear signal that
some of them were worth that much.
However, the big dogs in the NFT trade
knew what game they were playing from
the start. Reflecting on the mania in
2025, Colin Lee tells the Australian
Financial Review, quote, "We were very
much about getting in and getting out
within 24 hours." And that just sums it
up.
When you sell a JPEG for $69 million or
a cartoon ape for half a million, the
question becomes, what were people
really buying? Ownership, status, the
feeling of being early to something, or
maybe just the greater fool theory
wrapped in crypto language. The
technology is still here, but the jury
is still out on its mainstream use case.
So, what do you guys think? Were NFTs
just ahead of their time, or was it
always bound to end up as a disaster?
Let us know in the comment section
below. For me, looking back, I do find
it hilarious just how overinflated the
market got. Obviously, not for the
people that lost money, but just all the
hype around it. It does make you think
about how things are today. And just
maybe we're doing the same thing again
with LLMs. Sure, they're definitely
useful and worth something, but hundreds
of millions to trillions of dollars in
their current state, it could be seen as
yet another case of overenthusiasm for
something that's new to the mainstream.
Anyway, thanks for watching. My name is
Dogo and you've been watching Cold
Fusion and I'll catch you again soon for
the next episode. Cheers guys. Have a
good one.
Cole's fusion. It's new thinking.