Pixelmon Fiasco Augurs Trouble for Frothy NFT Market
The Pixelmon NFT collection raised $70M with weak imagery.
Three weeks ago, Pixelmon, an NFT gaming project on the Ethereum blockchain, raised over $70M in a highly anticipated drop.
That’s insane. And you’ll soon learn why.
The ongoing boom in GameFi and Metaverse NFTs has clearly caused investors to drop their standards when it comes to doing their research. Mainstream media coverage of NFT flippers making millions has led to a fresh influx of fortune hunters looking to strike gold, or in this case, a rare jpeg. Hype and the fear of missing out rule the day, and are a lethal cocktail that enabled Pixelmon to pull it off.
Drawing on elements from established gaming franchises Pokemon, Minecraft and Fortnite, the project’s roadmap promises Pixelmon NFT holders play-and-earn abilities, future airdrops of in-game assets, and other perks in “the largest and highest quality game the NFT space has ever seen.”
The sale was conducted via a Dutch auction that started at 3 ETH ($9,000) with prices dropping by 0.01 ETH every minute. The entire collection of 10,000 NFTs sold out in an hour and the final buyers ended up paying 2.4 ETH ($7200).
The hype couldn’t sustain the lofty launch price, and prices on OpenSea quickly fell below 1.5 ETH ($4500), saddling initial buyers with a whopping 50% loss.
On Feb 25, the Pixelmon NFTs were revealed and bore little resemblance to the slick animations in the teaser posted prior to the sale.
As NFTs have evolved over the last year, we’ve seen the artwork become progressively better. The Pixelmons reversed that trend with what may be the worst reveal ever.
Blockchain sleuth zachxbt tweeted, “I think it’s fair to say all the buyers were rugged. Stop supporting cash grab NFT projects.”
He went on to highlight that the developers have spent 400 ETH of the raised funds to purchase high-value NFTs from collections like Bored Ape Yacht Club, CloneX and Azuki. This had been confirmed by Pixelmon project lead Syber in the project’s Discord prior to the reveal.
Even worse, some of the characters were stock models from Unity, a popular game engine and development platform, while others had been commissioned from a freelance artist who was unaware that their work would be used in an NFT project.
A mess. In response to the backlash, Syber tweeted an apology, saying that “the reveal was unacceptable.”
The next day, it was announced that development of the Pixelmon game would continue in partnership with Magic Media, a gaming studio.
The floor price of the collection currently sits at 0.32 ETH ($950), down 89% from the starting mint price of 3 ETH.
A star has been discovered, however.
Pixelmons with the ‘Kevin’ trait have inspired a series of memes and multiple derivative collections and have a floor price of 5 ETH ($15,000).
We’ll have to wait and see how the Pixelmon saga plays out, but the fact that an anonymous team with no proven track record was able to raise $70M on hype alone shines a light on the speculative mania currently prevalent in the NFT markets.
The GameFi space continues to be popular with investors in 2022. Open, interoperable metaverses like NFT Worlds, TreasureDAO and Worldwide Webb that encourage new projects to build on top of them have seen prices rise dramatically this year.
Competition for new mints has increased substantially since NFT flipping caught the attention of mainstream media. People reading about jpegs being sold for hundreds of thousands of dollars want in on the action, and everyone’s looking for the next Bored Ape Yacht Club.
The whitelist grind has turned into an industry, with some collectors outsourcing the tedious tasks.
Some influential NFT collectors see this as a sign that NFTs will underperform in the near term.
Treeverse founder Loopify recently posted a thread on the market.
An ongoing Twitter poll by Zeneca, an NFT influencer, shows that 60% of participants are currently either mildly or very bearish.