With the non-fungible token market approaching the foam point, it may be time to sit down and ask: “What’s going on here?” After all, the $ 750,000 in revenue from the recent sale of a single “foreign” CypherPunk NFT could have paid for a reasonably sized home.
The cryptographic world in general is only 12 years old, entering adolescence, but cryptographic art – art in a chain of blocks – and non-fungible tokens have just come out of their terrible two years. The launch of a CryptoKitties that defined a time dating back to 2017 and 2018, and Ethereum’s non-fungible token, ERC-721 – which is used by many digital galleries as well as non-artistic NFTs – was not developed and implemented until early 2018. What is being 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 soon became more – a kind of social movement. In the same vein, cryptographic art can evolve to be more than just another collector. The technology behind this could make every person on the planet – not just the top 1% – owner of unique pieces of art, proponents say. Or, as the winner of a cryptographic art auction in December said: “It is my greatest wish that cryptography is understood as a liberating technology”.
There is no doubt, however, that art – physical or digital – also involves money. The aforementioned “liberator” art owner also offered $ 777,777 for a cryptographic work by the artist Beeple (aka Mike Winkelmann), and it seems fair to ask in light of similar events whether the digital art market is overheating.
An emerging culture?
“It is a bubble in the sense that capital is flying quickly to the NFT market and a large part of that capital comes from individuals who would otherwise be using that capital to invest and / or trade cryptocurrency,” Vladislav Ginzburg, art CEO digital and collectible market blockparty, said Cointelegraph. But something else is also happening, he added: “There is a real culture of collecting emerging around digital art and cultural assets supported by the NFT.”
Giovanni Colavizza, assistant professor of digital humanities at the University of Amsterdam, told Cointelegraph: “I believe we are in full price discovery mixed with the rapid growth of the NFT collectible space.” In addition, he added that the more wealthy individuals enter the market, the more “creatives realize how this space can allow them to monetize their work”.
The currently formed cryptography world is twofold, said Ginzburg, encompassing artists who created digital art from the start, but had trouble monetizing and distributing their works – and for whom tokenization is a gift – as well as traditional physical artists, many with followers significant, but seeking an even larger global audience.
Justin Roiland, who just sold a cryptographic piece of art for $ 150,000 in a silent auction on an art platform owned by Gemini, for example, belongs to the first group. “He is an animator – a digital art form – who managed to monetize his characters and animations by commercial means on a popular television program,” explained Ginzburg, adding:
“Entering the NFT space allowed it to remain digitally native, but to sell truly exclusive and possible works of art without having to learn a new medium, such as printing.”
For traditional artists interested in adopting NFTs, “the path is less clear,” added Ginzburg, whose company is exploring with these artists how NFTs “can support their physical work, as a ‘complement’ or possibly a digital extension.”
A niche within a niche market
The traditional art world, where total annual transactions exceed $ 60 billion, surpasses digital art, but still remains a market niche “full of information asymmetries and all kinds of arbitrary barriers to entry that keep it artificially small ”Noted Colavizza. The NFT space, by comparison, is completely transparent and open to anyone, so it’s not surprising that some established artists want to test the waters, and this may have something to do with NFT’s recent activity.
“A number of recent big drops were due to established creatives with a following of followers switching to NFT and bringing it with them,” said Colavizza, citing Beeple, who auctioned his entire NFT collection for $ 3.2 million, including the only work cited above that was for $ 777,777, breaking Trevor Jones’ previous record of cryptographic art 14 times.
Another reason for the recent activity, of course, “is the new outbreak of cryptography,” said Colavizza. Bitcoin and Ether (ETH) reached historic highs last month. “Several deep pockets are being or have been made. High liquidity means that many are looking for ways to invest, and NFT collectibles are a rapidly growing space to do so. “The disadvantage of this is the greater volatility in the market, he added.
There may be a DeFi aspect to running the NFT as well. “Some collectors have clear plans for their collections – for example, using them as support for other DeFi assets or for developing properties / projects in virtual worlds,” added Colavizza. In fact, FlamingoDAO, the cryptographic art collective that bought the “alien” CryptoPunk for $ 750,000, announced its intention to acquire NFTs and convert them “into fractional works so that they can be plugged into emerging DeFi platforms, with rights to these. works maintained and managed by an increasing number of people in the Ethereum ecosystem. ”
A haven for speculators?
Many, of course, see all this as a rationalization of what is just market speculation. Misha Libman, co-founder of the art market Snark.art, told Cointelegraph: “There is clearly much more speculative buying in the crypto space with some buyers interested in launching NFT tokens for profit”, certainly more than in the traditional art world. In addition, “we are seeing many emerging artists and it is difficult to assess where prices reflect the quality of works of art or where they are most driven by speculation.”
Ginzburg agreed that there was a lot of speculative money entering the NFT market, which could come out just as quickly, but that also happens in the traditional art world. Still, the base of the traditional art market is the collection. He added:
“Pure speculators tend to be identified, isolated and shown very quickly. Collection keeps prices stable and the market grows reliably. This culture of collecting is emerging in the 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 of traditional art: Who are the artists? What are your experiences and achievements? Is their work quality? Which collectors are interested in them or already have their work? Which galleries / platforms are exhibiting your art?
“If there is a primary difference I see, it is the new creative freedoms that digital art provides the creator,” said Ginzburg. “I would judge NFTs additionally on how many new elements they can bring together: audio, movement, physical tracking, etc.”
Priyanka Desai, representative of the FlamingoDAO community, told Cointelegraph that a big difference from the price of traditional art is that “no auction house is getting a share, it’s point by point” and it is also up to content creators to decide when a offer will be accepted. Traditional art auction houses like Christie’s and Sotheby’s can charge commissions of 25% or more. Open Sea, an NFT sales platform, by comparison, takes just 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 crypto activity if the price of ETH and / or BTC plummets, as it did in March 2020? “It can happen in any market and it happens in traditional art,” said Desai. In any case, the NFT market started to rise well before the last rise in cryptocurrency.
Who are the collectors?
Speculators aside, is the profile of the typical cryptographic art collector very different from the traditional art collector? The buyer of cryptographic art “tends to be young and tech-savvy. They are already familiar with encryption, even if they have none, ”said Ginzburg. 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 definitely interested in culture when it comes to music and fashion. “
Libman told Cointelegraph: “The collectors we are seeing in this space are generally not from the world of traditional art. They are generally young, educated, technology-friendly and, like other collector markets, profess specific tastes and strategies. “As the world of cryptography becomes more saturated with NFTs, they are becoming more selective, added Libman.
Related: Tokenized art: NFTs paint a bright future for artists, blockchain technology
FlamingoDAO, the cryptographic 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 enter crypto. They are a mix of ages – “even some people over 50”.
A fad induced by COVID?
Will demand for symbolic art decrease if and when the coronavirus pandemic ends and people return to visit museums and art galleries? “There is no doubt that the pandemic has given the digital art market a big boost,” said Libman, but museums were expanding their digital art collections before COVID-19 and he expects that process to continue.
“When we look at the adoption of the digital format in other industries, since publishing films and music, we believe that the expansion of the digital art market is inevitable,” he said, adding:
“Whether the person experiences this on the wall or on the smartphone, only the format changes. Digital allows artists to reach much wider audiences without the complications of crossing physical boundaries, applying for visas and worrying about various logistics. “
Will everyone have digital art?
Overall, Libman 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 optimistic, although I am also aware that volatility is high and therefore there will be bumps along the way.”
According to Ginzburg: “The outlook here is extremely positive, as we will see some of the truly great digital artists – who have limited themselves to monetizing their work through commercial means – start to seriously focus on their personal art as a revenue generator via NFTs. “
In the future, having unique art will not be restricted to the elites who sponsor Christie’s and Sotheby’s, Desai told Cointeleraph. “Everyone will have digital art on their walls. Having digital art will be part of your digital (online) existence, part of your identity, like sharing your likes on music or movies on social networks.