With the infallible drawing market approaching the froth, it may be time to sit back and ask: “What’s going on here?” After all, the proceeds of $ 750,000 from the recent sale of a single ‘foreign’ CypherPunk NFT could have paid for a reasonably sized home.
The crypto world in general is only 12 years old, and adolescence is beginning, but crypto art – art on a blockchain – and non-flammable signs are just out of their terrible two. The launch of an epoch-defining CryptoKitties goes back to 2017 and 2018, and Ethereum’s non-fungible token, ERC-721 – used by many digital galleries as well as non-art NFTs – was only developed in early 2018 and rolled out. is discussed here is still very new.
On top of that, Bitcoin (BTC), the world’s first blockchain project, was initially just a more efficient way of transferring money, although it soon became more – a kind of social movement. In a similar vein, crypto-art can become more than just another collection. The technology behind it can make every person on the planet – not just the best 1% – owners of unique works of art, proponents say. Or as the winner of a crypto art auction said in December: “It is my greatest wish that crypto be understood as a liberating technology.”
However, there is no doubt that art – physical or digital – is also about money. The ‘liberating’ owner quoted above also offered $ 777,777 for a crypto work by artist Beeple (aka Mike Winkelmann), and it seems fair to ask in the light of similar events whether the digital art market is overheating is.
An emerging culture?
“It’s a bubble in the sense that capital flies fast to the NFT market, and a large portion of the capital comes from individuals who would otherwise use the capital to invest and / or trade in cryptocurrency,” Vladislav Ginzburg , CEO of Digital Art. and the collectible market Blockparty, Cointelegraph said. But there’s something else going on, too, he added: “There’s a real culture of collection created by NFT-backed digital arts and cultural assets.”
Giovanni Colavizza, assistant professor of digital humanities at the University of Amsterdam, told Cointelegraph: “I believe we are a complete price discovery, mixed with rapid growth in the NFT collection space.” He further added that as more affluent individuals enter the market, the more the “creative people realize how this space can enable them to earn their jobs.”
The crypto-art world as it currently stands is twofold, says Ginzburg, and embraces artists who have created digital art from the beginning, but have had trouble earning and distributing their works – and for whom tokenization is a blessing – as well as traditional, physical artists. , many with significant follow-up, but who want an ever-growing global audience.
Justin Roiland, who just owned a $ 150,000 crypto piece of art at a silent auction on a Gemini art platform, belongs to the first group, for example. “He is an animator – a form of digital art – who could earn his characters and animations commercially in a popular television program,” explains Ginzburg, adding:
“By entering the NFT space, he was able to stay original digitally, but sell truly unique and possessive artworks without having to learn a new medium, such as printing.”
For traditional artists who would like to adopt NFTs, ‘the way is less clear’, adds Ginzburg, whose firm, together with such artists, is investigating how NFTs can ‘support their physical works, as an add-on’ or possibly ‘ a digital expansion. ‘
A niche within a niche market
The traditional art world, where total annual transactions exceed $ 60 billion, dwarfs digital art, but it remains a niche market “full of information asymmetries and all sorts of arbitrary barriers to entry that keep it artificially small,” Colavizza said. The NFT space is, by comparison, completely transparent and open to all, so it’s not surprising that some established artists want to test the waters, and that it may be related to recent NFT activities.
“Several recent big drops are due to established creators with a follower base moving to and bringing along NFT,” said Colavizza, referring to Beeple, which auctioned off its entire NFT collection for $ 3.2 million, including the some work cited above. for $ 777,777, which crushed Trevor Jones’ previous crypto-art record by 14 times.
Another reason for recent activity is ‘the new increase in crypto’, Colavizza said. Bitcoin and Ether (ETH) have reached historic highs in the past month. ‘Several deep pockets are made or have been made. The high liquidity means there are many ways to invest, and NFT collectibles are a fast growing space to do so. “The disadvantage of this is higher volatility in the market,” he added.
The NFT run can also have a DeFi aspect. “Some collectors have clear plans for their collections, for example to use them as support for other DeFi assets or to develop estates / projects in virtual worlds,” Colavizza added. Indeed, FlamingoDAO, the crypto-art collective that bought the “alien” CryptoPunk for $ 750,000, announced its intention to acquire and convert NFTs “into fractionalized works so that they can be linked to emerging DeFi platforms, with the rights on these works held and managed by a growing number of people in the Ethereum ecosystem. ”
A haven for speculators?
Many, of course, see it all as so much rationalization of what is just market speculation. Misha Libman, co-founder of the art marketplace Snark.art, told Cointelegraph: “There are clearly many more speculative purchases in the crypto space, and some buyers are interested in the NFT signs of profitability,” certainly more than in the traditional art world. In addition, “we see many emerging artists, and it is difficult to determine where the prices reflect the quality of the artwork or where it is more driven by speculation.”
Ginzburg agreed that there would be a lot of speculative money in the NFT market, which could leave just as quickly, but it is also happening in the traditional art world. However, the foundation of the traditional art market is the collection. He added:
‘Pure speculators are usually quickly identified, isolated and displayed. Collectorship keeps prices stable and the market grows reliably. This culture of collection originates in NFTs, and it will be exciting to see. ”
Asked how crypto-art prices 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? Do they have work quality? Which collectors are interested in or own all their work? Which galleries / platforms display their art?
“If there is one primary difference I see, it is the new creative freedoms that the creator offers to digital art,” Ginzburg said. “I will also evaluate NFTs on how many new elements they can bring along: sound, movement, physical accompaniment, etc.”
Priyanka Desai, a community representative of FlamingoDAO, told Cointelegraph that a big difference from the price of traditional art is that there is ‘no auction house that makes a cut, it’s peer’, and it’s also to the creators of the content to decide when an offer will be accepted. Traditional art auction houses such as Christie’s and Sotheby’s can charge commissions of 25% or higher. Open Sea, an NFT sales platform, compares only 2.5% for sales on its platform.
Most NFT transactions are in Ether, the second largest cryptocurrency in the world after Bitcoin. What would happen to the art activity of crypto 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. Either way, the NFT market started to rise well before the latest rise of the cryptocurrency.
Who are the collectors?
Apart from speculators, does the profile of the typical crypto art collector differ much from traditional art collectors? The crypto-art buyer tends to be young and technically proficient. “They are already familiar with crypto, even if they do not own it,” Ginzburg said. The market is global, but most participants are American or European, although he admitted that ‘it is changing very fast. They may or may not be art collectors, but they are definitely interested in culture when it comes to music and fashion. ”
Libman told Cointelegraph: ‘The collectors we see in this space usually do not come from the traditional art world. They are generally young, trained, technology-friendly and, like other collector markets, confess specific tastes and strategies. “As the crypto-art world becomes more saturated with NFTs, they become more selective,” Libman adds.
Related: Drawn Art: NFTs Paint a Bright Future for Artists, Blockchain Technology
FlamingoDAO, the crypto art collective launched in October, has 55 members – all accredited investors – including ‘deep crypto, deep NFT people’, said Desai, but also collectors from the traditional art world who want to switch to crypto art. art. It’s a mix of ages – ‘even a few people over 50’.
A GAD caused by COVID?
Will the demand for labeled art dive in as and when the coronavirus pandemic ends and people visit museums and art galleries again? “There is no doubt that the pandemic has given the digital art market a huge boost,” Libman said, but museums have expanded their digital art collection before COVID-19, and he expects the process to continue.
“When we look at the acceptance 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 through their smartphone, only changes the format. With Digital, artists can reach much wider audiences without the complications of exceeding physical boundaries, applying for visas and familiarizing themselves with various logistical matters. ”
Will everyone own digital art?
Libman generally said, “The NFT art space is an emerging market, and over time it will mature and probably look like its traditional counterpart.” Colavizza added: “I am clumsy while also being aware that volatility is high and that there will therefore be bumps.”
According to Ginzburg: “The outlook here is extremely positive, because some of the amazing digital artists, who earn their commercial means, earn seriously on their personal artworks as a revenue generator. via NFT’s. ”
In the future, the possession of unique art will not be limited to the elite who protect Christie’s and Sotheby’s, Desai told Cointeleraph. ‘Everyone will have digital art on their walls. Owning digital art will be part of your digital (online) existence, a part of your identity, such as sharing your preferences in music or movies on social media.