NFT projects are getting ‘obliterated’ amid crypto crash, The Drop CEO says

The Drop Founder & CEO Gannon Breslin joins Yahoo Finance Live to discuss the state of NFTs, the crypto crash, bitcoin dropping below $30,000, and the outlook for digital artists.

Video transcript

AKIKO FUJITA: Well, the market for non-fungible tokens has fallen, along with the declines in crypto. NFT sales fell to 25,000 last week, an 80% drop from the peak last fall. Now Morgan Stanley's warning more pain may be in store for investors of digital assets. For more, let's bring in Gannon Breslin. He is The Drop founder and CEO. Those numbers certainly don't look good. What do you see?

GANNON BRESLIN: No, they don't. No, they don't. I don't think numbers look get anywhere. You know, we're seeing with the S&P 500 down 14% over the past six months, NASDAQ down 30% over the past six months, interest rates up. What we're seeing in this market right now with NFTs is all of these small projects, ones that don't have a very strong roadmap, and I would say direction, just completely get obliterated. And we're seeing a consolidation into the really well-known big brand names, like Bored Ape Yacht Club, Doodles, et cetera.

There is still some great news. We're seeing halfway through May right now, we're still at the same volume, even though we're halfway through May, as November of this past year. So we saw this meteoric rise in NFTs so quickly. It's not a complete drop-off, but people are, you know, a little nervous. What's really going to show is this upcoming month and weeks what happens at these events. We're seeing VeeCon this upcoming weekend, Ape Fest and NFT New York City, and that's going to be the real pulse of the community. So it's going to be really exciting.

BRIAN CHEUNG: Hey, Gannon. Brian Cheung here. Great to speak with you. I want to ask you just about, kind of, the liquidity in the market right now. Because even before the big spill that we saw in crypto, I heard NFT traders saying, look, it's really weird because you'll see a brand new project that's going to come out, and then all of a sudden, you see people liquidating on OpenSea from other big projects to go over there. And every time there's something new, you see the tide go out and then come back in again. Do you think that with the spill that we're seeing, that that's even going to further dry up liquidity? And could it possibly even make some projects go belly up?

GANNON BRESLIN: No, it's definitely possible. There is a little bit of a bathtub effect happening here. When a large project mints, you're seeing other large projects fall in floor price because they're trying to get liquid to be able to buy the new thing on the block. We saw this with the Otherside mint, which was possibly the biggest mint of all time, over $200 million sucked into this project. And of course, this was the a16z-backed 450 million Yuga Labs Otherside verse, right? And when we saw this mint, we just saw all projects' floors fall.

So we are seeing this bathtub effect. It is real. But again, it's not as bad as it looks, I would say, because some of these floors are still holding strong. For instance, a recent project that minted was Moonbirds, and that happened right before this bear market, per se. It dropped from 44 down to 25. Obviously, that's a big significant drop, almost a 50% drop. But, you know, it's not zero. It's not like some of these other smaller projects that have just completely gotten wiped away.

AKIKO FUJITA: Gannon, you were coming off of a year where it felt like everybody was minting something, right? I mean, as you said, we are coming off of peak NFT. And I wonder where you think the value is going to hold, whether it is in art, whether it's in music, entertainment? I mean, when you talk about NFTs as a whole, where is the value?

GANNON BRESLIN: Definitely. I mean, we're seeing value in many forms. We just got announced that Spotify is doing their own NFT integration. We're seeing artists being able to have collections on their own profiles. Instagram announced that they're going full board NFTs. Everyone's going to be able to have NFTs on their profiles, almost like a marketplace in a way, as we see with other brands on Instagram.

I really do believe that the true utility is going to be in forms of passes. For instance, coming up for NFT New York City, Bored Ape Yacht Club is putting on Ape Fest at Pier 17, which holds close to 4,000 people. It's a three-day event. And if you own a Bored Ape or Mutant Ape, you're able to go to this special event. And last year, I was fortunate enough to go through a plus-one, and we saw amazing artists play.

And so I think it's-- the true utility is behind what projects on what they're delivering to their holders. And obviously, we have the art and the brand ability. You're seeing people create restaurants out of Bored Apes and stuff like that. Bored and Hungry, it's in California. We had our co-founder actually visit it. So there's a lot of brand ability here, but I see the holder in passes and exclusivity, almost like a VIP club, per se.

BRIAN CHEUNG: And, Gannon, lastly, I want to ask here just about the platforms by which NFTs are trading. We know OpenSea is obviously a big one. But we've seen Coinbase, for example, try to enter the space. They're saying that's going to be a massive possible windfall and new revenue stream for them. But look, the stock has been treated very, very-- well, let's just say it, it's dropped off a cliff, essentially, since their earnings. So how do you think you view other types of competitors coming into the space? Because we know the uptake so far for their NFT marketplace has not been very high.

GANNON BRESLIN: Yeah, I'm hurting. I own Coinbase, so that is down significantly over the year. You hit a soft spot there, Brian. But what we're seeing really is the first to market OpenSea is crushing it. Coinbase came out with their platform. We have other brands coming out with their platforms. And people are just-- it doesn't matter, it seems like, right now. People aren't transitioning. OpenSea has the clear lead, and they're holding onto it. And so I don't know how long some of these other companies that are coming out with these NFT marketplaces are going to stick around. I know obviously Coinbase has the amount of capital, too. But OpenSea is by far the market leader there, and they're holding on to that lead.

BRIAN CHEUNG: All right, well, it could be worse. It could be Terra, I guess. So at least there's that. Gannon Breslin--

GANNON BRESLIN: Right.

BRIAN CHEUNG: --The Drop founder and CEO. Thanks so much for jumping on the show. Really appreciate you taking.