Art market: what future for NFTs?

Every year, $ 50 to $ 70 billion worth of works of art are sold worldwide. In addition, the art market employed around 3 million people worldwide in 2017 in over 300,000 companies. Most of these companies are art galleries. However, art is as complex a market as the number of dissimilar works that make it up. However, various indices show that the art market can also be extremely lively and can take on a certain quality of refuge over time. From now on, the whole question of the evolution of artistic practices arises. Some projects therefore try to combine classical art with NFT, in a context in which contemporary art has never been so successful.

The art market: the measure of excess

As artprice, one of the leaders in art information, pointed out in its annual report, there is a big difference between the average selling price and the average selling price. In 2021, the average selling price of art was over $ 25,000, while the average price was just over $ 900. That is, half of the art sales are under $ 900 ea a small part of the work sells for several hundred thousand, or several million euros.

What are also the performances linked to the art market? According to the index established by artprice, the price of contemporary art would have multiplied by almost 6 in the 1998-2020 period alone. However, the representations of classical art are less important. The design sector would thus have seen its value double in just over two decades. Overall, art recorded an increase of + 50% to + 70%. It is important to highlight the increase in the price of works of art in 2008, 2012-2014 and 2020. In other words, works of art generally benefit from periods of crisis.

Art market value index for artprice. Source: Artprice-Global-Indexes-Update-2020.png (1655 × 770)

Furthermore, another index calculated by Sotheby’s shows that the price of the works has multiplied up to 500 times its price in 1950. By the early 1990s, the market value would have been multiplied by 4 or 5. The average annual growth rate of the value of the works is estimated by Sotheby’s at 8.5%.

Art & NFT: an essential combination?

We have to keep in mind that art and NFT are still two fairly separate markets. In this sense, Traditional art investors are still rarely the same buyers of NFTs. Indeed, NFTs have experienced a significant boom within the crypto ecosystem, also sparking interest among artists and some traditional investors. We will focus here on understanding the mechanisms of the art market and the NFT market and their possible combination in the future.

A combination of art and NFT?

We have shown that art a specific market that is proving to be globally lively over time. This is the market contemporary art that would thus record the greatest performances. Contemporary art has significantly accelerated the dematerialization of works and the expression of new trends. On the other hand, there is the nascent token-based NFT market (cryptos). NFTs, which guarantee the authenticity of an object, are not limited to art. They include virtually any object that requires or would require single sign-on.

However, several differences remain between the art and the NFT. First of all, the capitalization of the art market far exceeds that of NFTs. This NFT ecosystem capitalization is estimated at nearly $ 2 billion by Coinmarketcap at the end of July 2022. Additionally, NFTs are a technology rather than a job in itself. In this sense, the union between art and NFT must ideally take place in the sense of art. Therefore, NFTs can respond to changes in the art market in several ways:

  • First of all, digital works can be authenticated and protected more effectively. NFTs could therefore be a way to empower digital art creation.
  • On the other hand, NFTs can be used to authenticate physical works. The costs associated with the storage of the work and the required security would thus be reduced in the case of centralized auction houses.
  • Finally, it is important to remember that NFTs gave birth to the metaverse. The metaverse offers the possibility of accessing public or private galleries made up of collections of digital works where is it users can be simple visitors or owners of these same works.

Metaverse, NFT and Art!

The idea of ​​mixing physical works of art with NFT, as well as a metaverse, was particularly developed by projects such as the Private Museum. The project involves several million euros of investment and more than one hundred artists. It is significant to point out the progress of this type of projects in view of the global and fairly recent evolution of the cryptocurrency market. In any case, some the interest of traditional art players is clearly evident.

The art world is heading towards the a “Amazonia of Art” ? It is not impossible. The greater financialization of the art market in recent decades has accelerated this need for market fluidity.

The last few years have seen the expansion of an increasingly abstract and often dematerialized art. The important agility in the creation and exchange of works allows the democratization of art for many people. Art is by nature quite subjective, but works often tend to evolve with the sandstone of technological periods.

NFT: what reactions to the crisis?

We represented the Bored Ape Yacht Club collection index, which expired in ETH (ethereum). The value of these NFTs, among the most popular, has it decreased by more than 50% between May 2022 and June 2022. However, the price of these NFTs is still “historically” high. In the space of a year, the collection index went from 3 ETH to over 70 ETH today. This progression was technically performed in an ascending channel. The breakout of this channel in May suggested a target of around 45 ETH which was (almost) reached.

Value of the Bared Ape Yacht Club collection calculated by Tradingview

However, the NFT market remains highly fragmented. Most NFTs are worth little or nothing. While a small part of them sometimes sells for several million euros. NFTs will certainly remain more or less permanently, but their current form will likely evolve. The NFT market quickly becomes saturated with similar and many speculative works. From now on, the structuring of this market is essential for its survival. The survival of NFTs will surely depend on its ability to capture real interest among art practitioners, mainly galleries and artists.

The first NFT … In the course of great works …

But let’s finally remember a tasty anecdote to keep this in mind NFTs arise from art. The first NFT was thus born in 2014. The name of the original artwork: Quantum by artist Kevin McCoy. The artist, who already knew Bitcoin in 2013, wanted to reveal his interest in cryptocurrencies. The last sale took place in 2021 at the famous Sotheby’s house. The work sold for nearly $ 1.5 million. The Vice President of Contemporary Art at Sotheby’s in New York said …

“In 10 years with hindsight, if indeed these are to develop, this piece can represent and symbolize the beginning of something quite revolutionary and of great impact.

In short

The art market is one of the oldest markets in the world. To date, this market represents a flow of several tens of billions of dollars every year. But the fragmentation of the art market also increases the access differences that exist between overpriced masterpieces and abundant works. Overall, however, works of art can be an interesting and sometimes very profitable store of value. Despite this, the heart of the art industry remains dominated by a small number of often wealthy actors. In 2021, the biggest sale was in New York (Christie’s) for 103 million dollars. This is the painting by Pablo Picasso Woman sitting near a window (Marie-Thérèse)the price of which has thus doubled in the space of eight years.

So what about NFTs? Surprisingly enough, NFTs connected quite naturally to the art market. But the abuses of this market, and the important difference that still persists between the actors of NFT art and classical art, prevent immediate growth. The recent market decline has put the NFT project team launched in a few weeks into trouble. In parallel, art investors are starting to show some interest in a more comprehensive application of NFTs to the traditional art market.

Thus, some rare projects (private museum in particular) are the image of a new artistic offer. For the time being, these developing projects are still confined to the discretion of the art actors and the cryptocurrency market crisis. The future will show whether the digitization of our lives will also be that of art.

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Thomas Andrieu avatar

Thomas Andrieu

Author of numerous books, economic and financial editor on various sites, for many years I have developed a real passion for the analysis and study of markets and economics.

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