Art market: What future for NFTs?

Every year, around 50 to 70 billion dollars worth of works of art are sold around the world. In addition, the art market employed almost 3 million people worldwide in 2017 in over 300,000 companies. Most of these companies are art galleries. However, art is a market as complex as the number of disparate works that comprise it. However, several indices show that the art market can also prove to be very strong and can take on a certain quality of refuge over time. Since then, the whole question of the evolution of artistic works has arisen. Some projects thus seek to combine classical art with NFT, in a context where contemporary art has not been very good.

The art market: the measure of excess

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

What are the performances associated with the art market? According to the index established by artprice, the price of contemporary art would have increased by almost 6 in the period 1998-2020 alone. However, the performances of classical art are not very important. The design sector has thus seen its value double in over two decades. Overall, art recorded an increase of +50% to +70%. It is important to emphasize the increase in the price of works of art in 2008, 2012-2014, and 2020. In other words, works of art generally benefit from times of crisis.

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

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

Art & NFT: an important combination?

We must remember that art and NFT are still two separate markets. In this sense, Traditional art investors are rarely the same buyers as NFTs. In fact, NFTs are experiencing a significant development within the crypto ecosystem, while also sparking the interest of 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 show that art a specific market that has proven global strength over time. This is the market contemporary art that can thus record the greatest performances. Contemporary art greatly facilitates the dematerialization of works and the expression of new trends. On the other hand, there is a nascent NFT market based on tokens (cryptos). NFTs, which guarantee the authenticity of something, are not limited to art. This includes anything that requires or requires a sign-on.

However, many differences between art and NFT persist. First of all, the capitalization of the art market far exceeds that of NFTs. This capitalization of the NFT ecosystem is estimated to be around $2 billion by Coinmarketcap at the end of July 2022. In addition, NFTs are a technology rather than a job in themselves. In this sense, the combination of art and NFT should be best done in the spirit of art. Thus, NFTs can respond to changes in the art market in several ways:

  • First of all, Digital works can be more effectively authenticated and secured. NFTs can be a way to enhance digital artistic creation.
  • On the other hand, NFTs can be used to verify physical deeds. The costs associated with labor storage and the necessary security are thus reduced in the case of centralized auction houses.
  • Finally, it is important to remember that NFTs give birth to the metaverse. The metaverse offers the possibility of accessing galleries, public or private, composed of collections of digital works. emphasis Users can be simple visitors or owners of similar works.

Metaverse, NFT, and Art!

The idea of ​​mixing physical works of art with NFTs, as well as a metaverse, has been further developed in projects such as the Private Museum. The project involves several million euros of investment and more than a hundred artists. It is important to point out the development of this type of project is due to the global and relatively recent evolution of the cryptocurrency market. In any case, some The interest of traditional art players is clearly visible.

Is the art world headed for a “Amazon of Art” ? It is not impossible. The greater financialization of the art market in recent decades has facilitated this need for market fluidity.

Recent years have seen the expansion of a more abstract and often dematerialized art. The essential ability to create and exchange works allows the democratization of art for many people. Art is inherently somewhat subjective, but works often evolve with the sandstone through the stages of technology.

NFT: what is the reaction to the crisis?

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

Bared Ape Yacht Club Collection Value Calculated by Tradingview

However, the NFT market remains highly fragmented. Most NFTs are small or non-existent. While a small part of it is sometimes sold for several million euros. NFTs will certainly remain more or less permanent, but their current form will likely evolve. The NFT market is quickly filled with both and for many speculative works. Starting today, structuring this market is essential to survival. The survival of NFTs will certainly depend on its ability to capture the genuine interest of art players, especially galleries and artists.

The first NFT… In the course of great works…

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

“In 10 years of perspective, if it is actually developed, this piece could represent and symbolize the beginning of something quite revolutionary and impactful. »

In conclusion

The art market is one of the oldest markets in the world. Currently, this market represents the flow of several tens of billions of dollars per year. But the fragmentation of the art market also increases the disparities in access that exist between overpriced masterpieces and great works. In general, however, works of art can be an interesting and sometimes lucrative store of value. Despite this fact, the heart of the art industry remains dominated by a small number of often wealthy players. In 2021, the biggest sale was in New York (said Christie) at $103 million. This is a painting by Pablo Picasso Woman sitting by the window (Marie-Thérèse)whose price doubled within eight years.

So what about NFTs? Ironically, NFTs are naturally linked to the art market. But the abuses of this market, and the significant difference that persists between the players of the art of NFT and classical art, prevents immediate growth. The recent fall in the market has put the group of NFT projects launched for several weeks in difficulty. Along with this, art investors are beginning to show some interest in a more comprehensive application of NFTs in the traditional art market.

Therefore, some unique projects (Private Museum in particular) are the image of a new artistic offer. Currently, these development projects are still at the discretion of the artists, and the crisis in the cryptocurrency market. The future will show if the digitalization of our lives can also be in art.

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Thomas Andrieu's avatar

Thomas Andrieu

Author of many books, economic and financial editor of many sites, over the years I have developed a real passion for analyzing and studying markets and economics.

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