Non-fungible token (NFT) sales surged in August according to the largest platform for the burgeoning digital asset class as speculators bet growing interest across the art, sport and media worlds will keep prices rising.
The niche crypto asset, which is a blockchain-based record of ownership of a digital item such as an image or a video, exploded in popularity in early 2021, leaving many confused as to why so much money was being spent on items which do not physically exist.
The frenzy has now reached new highs. Sales volumes recorded on the largest NFT trading platform OpenSea have hit US$1.9 billion so far this month, more than ten times March's US$148 million.
In January 2021, the monthly volume recorded on the platform was just over US$8 million.
The jump was driven by secondary market sales, OpenSea said.
"What we have seen are a few NFT collections popping up in the last few weeks that have been very successful at launch and sold out. That activity has then filtered over to OpenSea where buyers look to flip their NFTs for a higher price," said Ian Kane, a spokesman for DappRadar, which tracks the market.
Earlier this week an anonymous user paid US$1.27 million worth of ethereum cryptocurrency for an image of a rock just weeks after the seller had bought it for the equivalent of US$5400 in the same cryptocoin.
Another NFT of an abstract digital artwork sold for 1000 ETH (US$3,322,710) earlier this week having been sold for 0.58 ETH (US$1366) in June.
NFT market data varies depending on providers' methodology, but DappRadar recorded 32 known NFT sales above $1 million in the past 30 days.
MichaelK, a 30-year-old NFT buyer who asked not to give his full name, said he has spent about US$250,000 on NFTs since September. He said he keeps 90 percent of his wealth in cryptocurrencies and NFTs.
Earlier this month, he bought an NFT of a cartoon penguin for around US$139 worth of ether, then sold it on four days later for around US$3956, according to Etherscan.
Other instances of high-return "flips" are visible on his OpenSea account, including a cartoon squiggle NFT bought for 0.01 ETH (US$33), then sold for 1.5 ETH (US$4,900) within seven hours.
MichaelK said the US Federal Reserve's ability to control the money supply played a role in his decision to speculate on largely unregulated crypto assets.
"When people hear these statistics they might think that I'm completely crazy... I look back at them and I say, you're holding a currency that's printed daily, to me you're crazy."
He said COVID-19 forcing people to spend more time at home, online, helped NFTs take off.
"I don't want to look at it as a bubble. I want to look at it as something new that's going to be a big wave," he added.
Rising cryptocurrency prices may have also played a role in the surge. NFTs are often valued in ether, which has risen around 23 percent in August.
Rabobank's head of financial markets research for Asia-Pacific, Michael Every, said that he was "gobsmacked" by the "bubblicious stupidity" of the NFT market.
He said that he saw the appeal of high returns for young people who would otherwise struggle to build wealth or get on the housing ladder, but compared it with buying a lottery ticket.
Every said NFTs were a bubble which would "absolutely" pop.
Meanwhile, social media giant Facebook is considering building products related to NFTs, according to a Bloomberg report.
"We're definitely looking at the number of ways to get involved in the space," Facebook executive David Marcus, who leads the group developing the company's Novi digital wallet, told Bloomberg Television.
"When you have a good crypto wallet like Novi will be, you also have to think about how to help consumers support NFTs. We're definitely thinking about this," he said.