With the non-tangible token market approaching foam point, maybe it’s time to sit back and ask: “What’s going on here?” After all, the $ 750,000 in proceeds from the recent sale of a single “alien” CypherPunk NFT could have paid for a fairly large house.
The crypto world in general is only 12 years old and entering adolescence, but crypto art – art on a blockchain – and intangible tokens are just out of their horrible pair. The launch of a timeline CryptoKitties dates back to 2017 and 2018, and Ethereum’s intangible token, ERC-721 – which is used by many digital galleries as well as non-art NFTs – was only developed and rolled out in early 2018. What is discussed here is still very new.
In addition, Bitcoin (BTC), the world’s first blockchain project, was initially just a more efficient way to transfer money, although it quickly became more – a kind of social movement. In the same vein, crypto art could evolve into more than just a collector’s item. The technology behind it could make every person on the planet – not just the top 1% – the owner of unique works of art, proponents say. Or, as the winner of a crypto art auction said in December: “My greatest wish is for crypto to be understood as a liberating technology.”
However, there is no doubt that art – physical or digital – is also about money. The above mentioned “liberating” art owner has done just that offer $ 777,777 for a crypto work by artist Beeple (aka Mike Winkelmann), and it seems reasonable to ask in light of similar events if the digital art market is overheating.
An emerging culture?
“It is a bubble in the sense that capital is quickly flying into the NFT market and much of that capital comes from individuals who would otherwise use that capital to invest and / or trade in cryptocurrency,” Vladislav Ginzburg, CEO of digital art and collectible market Blockparty, Cointelegraph said. But something else is also going on, he added: “A real culture of collectorship is emerging around NFT-backed digital art and cultural assets.”
Giovanni Colavizza, assistant professor of digital humanities at the University of Amsterdam, told Cointelegraph, “I believe we are discovering plenty of price mixed with rapid growth of the NFT collection space.” In addition, he added that as more wealthy individuals enter the market, the “creatives are more aware of how this space can enable them to monetize their work.”
The crypto art world as currently curated is twofold, Ginzburg said, and included artists who created digital art from the start but struggled to make money and distribute their works – and for whom tokenization is a boon – as well as traditional, physical performers, many with significant followers but looking to reach an even larger global audience.
Justin Roiland, who just sold a crypto art piece for $ 150,000 for example, in a silent auction on an art platform owned by Gemini, belongs to the first group. “He is an animator – a form of digital art – who has been able to monetize his characters and animations on a popular television show through commercial means,” explains Ginzburg, adding:
“Entering the NFT space allowed him to remain natively digital, but sell truly unique and proprietary artworks without having to learn a new medium such as printmaking.”
For traditional artists eager to adopt NFTs, “the road is less clear,” added Ginzburg, whose company is working with such artists to explore how NFTs “can support their physical works, as an ‘add-on’ or possibly a digital extension. . “
A niche within a niche market
The traditional art world, where total annual transactions exceed $ 60 billion, is eclipsing digital art, but it still remains a niche market “full of information asymmetries and all kinds of arbitrary barriers to entry that keep it artificially small,” Colavizza said. The NFT space, on the other hand, is completely transparent and accessible to all, so it’s not surprising that some established artists would want to test the waters, and that may have something to do with recent NFT activity.
“Several recent major declines have been due to established creatives with a follower base moving to NFT and bringing it with them,” said Colavizza, referring to Beeple, who auctioned its entire NFT collection for $ 3.2 million, including the single work mentioned above for $ 777,777, breaking Trevor Jones’ previous crypto art record 14 times.
Another reason for the recent activity is undoubtedly “the new wave of cryptocurrencies,” said Colavizza. Bitcoin and Ether (ETH) reached historical highs in the past month. “Several deep pockets are being or have been made. The high liquidity means many are looking for ways to invest, and NFT collectibles are a fast-growing space to do just that. The downside to this is higher market volatility, he added.
There may also be a DeFi aspect to the NFT run. “Some collectors have clear plans for their collections – for example, they use it as support for other DeFi assets or for developing estates / projects in virtual worlds,” added Colavizza. Indeed, FlamingoDAO, the crypto art collective that bought the ‘alien’ CryptoPunk for $ 750,000, announced its intent to acquire NFTs and convert them “into fractional works so that they can be connected to emerging DeFi platforms, with rights to these works owned and managed by a growing number of people in the Ethereum ecosystem.”
A haven for speculators?
Many, of course, see all this as a rationalization of what is mere market speculation. Misha Libman, co-founder of art market Snark.art, told Cointelegraph, “There are clearly a lot more speculative purchases in the crypto space, with some buyers interested in flipping the NFT tokens for profit”, certainly more than in traditional art. world. In addition, “we see many emerging artists, and it is difficult to estimate where the prices reflect the quality of the artworks or where they are more driven by speculation.”
Ginzburg agreed that there was a lot of speculative money entering the NFT market that could leave just as quickly, but this is also happening in the traditional art world. Yet the foundation of the traditional art market is collectorship. He added:
“Pure speculators are often quickly identified, isolated and shown. Collectorship keeps prices stable and the market grows reliably. This culture of collectorship is emerging in NFTs and it will be exciting to watch. “
When asked how the prices of crypto art are determined, Ginzburg replied that the basic rules are similar to those in traditional art: who are the artists? What are their backgrounds and achievements? Is their work quality? Which collectors are interested in them or already own their work? Which galleries / platforms present their art?
“If there is one primary difference that I see, it is the new creative freedoms that digital art offers the creator,” Ginzburg said. “I would also rate NFTs on how many new elements they can bring together: audio, movement, physical guidance, etc.”
Priyanka Desai, a community representative at FlamingoDAO, told Cointelegraph that a big difference from traditional art pricing is that there is “no auction house taking part, it’s peer-to-peer,” and it’s also up to the content creators to decide when a bid will be accepted. Traditional art auction houses like Christie’s and Sotheby’s can charge commissions of 25% or higher. Open Sea, an NFT sales platform, for comparison, takes only 2.5% for sales on its platform.
Most NFT transactions take place in Ether, the world’s second largest cryptocurrency after Bitcoin. What would happen to crypto art activity if the price of ETH and / or BTC collapsed, as happened in March 2020? “It can happen in any market, and it happens in traditional art,” Desai said. In any case, the NFT market started to rise well before the last cryptocurrency run-up.
Who are the collectors?
Speculators aside, does the typical crypto art collector’s profile differ much from traditional art collectors? The buyer of crypto art “is usually young and tech-savvy. They are already familiar with crypto, even if they don’t have one, ”Ginzburg said. The market is global, but most of the participants are American or European, although he admitted that “this is changing very quickly. They may or may not be art collectors, but they are certainly interested in culture in relation to music and fashion. “
Libman told Cointelegraph, “The collectors we see in this space aren’t usually from the traditional art world. They are generally young, well-educated, technologically friendly and, like other collectors’ markets, have specific tastes and strategies. As the crypto art world becomes more saturated with NFTs, they become more selective, Libman added.
FlamingoDAO, the crypto art collective launched in October, has 55 members – all accredited investors – including “deep crypto, deep NFT folks,” Desai said, as well as collectors from the traditional art world looking to transition to crypto art. They are a mix of ages – “even a few people over 50”.
A craze caused by COVID?
Will the demand for symbolic art plummet if and when the coronavirus pandemic ends and people revisit museums and art galleries? “There is no doubt that the pandemic has given a tremendous boost to the digital art market,” said Libman, but museums expanded their digital art collections before COVID-19, and he expects this process to continue.
“Looking at the adoption of digital format in other industries, from publishing to film and music, we believe that the expansion of the digital art market is inevitable,” he said, adding:
“Whether the person experiences it on the wall or via their smartphone, only the format changes. Digital allows artists to reach a much larger audience without the complications of crossing physical boundaries, applying for visas, and dealing with various logistics. “
Will everyone own digital art?
Overall, Libman said, “The NFT art space is an emerging market and will mature over time and likely resemble its traditional counterpart.” Colavizza added, “I am optimistic while also aware that volatility is high and there will be bumps along the way.”
According to Ginzburg, “The outlook here is extremely positive as we will start to seriously focus some of the really great digital artists – who have confined themselves to monetizing their work through commercial means – on their personal artworks as a revenue generator. Via NFTs . “
In the future, owning unique art won’t be limited to elites who patronize Christie’s and Sotheby’s, Desai told Cointeleraph. “Everyone has digital art on the wall. Owning digital art becomes part of your digital (online) existence ”,” part of your identity, such as sharing your preferences in music or films via social media.