Nfts
How “more mature” collectors are fueling the return of the NFT market
In 2021, Jim Cramer, former hedge fund manager and host of CNBC’s Mad Money, appeared to sound the death knell for Bitcoin investing after the Chinese government cracked down on cryptocurrency mining (the term used for creation of new units of Bitcoin). Bitcoin). “I sold almost all my bitcoin. I don’t need it,” Cramer announced on CNBC’s Squawk on the Street. This was a year before the value of various cryptocurrencies, such as the stablecoins TerraUSD and Luna, as well as the multi-billion dollar cryptocurrency exchange FTX, collapsed and Bitcoin itself fell 77% below its all-time high.
Is the story over? Barely. Bitcoin and other forms of crypto have rebounded to new highs, and Cramer himself has bucked the trend, recently saying that Bitcoin is “here to stay.”
What has been called the “crypto winter” is over, leading to a surge in interest and prices for NFTs (non-fungible tokens), which include art images. “The hype and speculative frenzy that NFTs experienced several years ago is gone,” says Ric Edelman, founder of the Digital Assets Council of Financial Professionals, which helps financial advisors understand this new area of investing. “Prices are rebounding, trading volume has rebounded and we are seeing big tickets again.”
Don’t believe the hype: the market may be moving away from its frenetic beginnings to focus more on artistic merit Florent Tournier
The NFT market has taken off in 2021, with museums, artists, groups new to the market such as Yuga Labs (of Bored Ape Yacht Club fame), Dapper Labs (creators of CryptoKitties) and Top Shots of the National Basketball Association, as well as celebrities such as Snoop Dogg, William Shatner, Damien Hirst and Lindsay Lohan creating their own blockchain-based digital assets purchasable with crypto. The NFT market, registered on blockchain platforms and marketplaces, is estimated to have reached $41 billion in 2021, falling to around $21 billion at the end of 2022, before losing around 95% of its value in 2023.
Bernadine Bröcker Wieder, managing director of Arcual, a company with offices in Berlin, London and Zurich that uses blockchain technology “to facilitate a new and improved standard for secure transactions in the art market,” says that “the value of digital art Purchases purchased on NFT marketplaces were indeed inflated for a while, alongside cryptocurrency prices, thanks to speculation sparked by the pandemic, and there has been a rollback in 2023.” She adds that “activity on NFT marketplaces has also increased, likely due to positive news about cryptocurrencies in the press.”
The art market’s interest in NFTs has matured, according to Mark Cuban, owner of the Dallas Mavericks basketball team and investor in OpenSea, one of the largest marketplaces for user-owned digital goods. which include collectibles, gaming items, domain names, digital art, and other blockchain-based assets. “It’s much more deliberate and collector-driven,” Cuban says, adding that “people are less focused on immediate appreciation and more on appreciating the art itself.”
Others involved in the NFT world also challenge the perception that this form of collectible is more hype than substance. “Our goal is to support the artists represented by Pace Gallery in their research into new media,” says Ariel Hudes, head of Pace’s NFT division, Pace Verso, established in 2021. “We are not trying to increase [price] speculation. We do this because we believe in artists and the work they create.
Artistic value
Others make similar claims about helping artists rather than fueling a frenzied market. Brian McAlister, co-founder of Objkt.com, which claims to be the largest NFT marketplace on the Tezos blockchain, says that “our focus as a platform has always been on the artistic value and potential of digital art , and not on speculative trends. in cryptocurrency. He adds that “as speculation subsided, true art collectors and lovers remained in search of real value and artistic integrity. These collectors are not primarily motivated by potential earnings, but rather by the desire to engage in patronage and directly support the artists behind the work.
Another major player in this space, Sunil Singhvi, head of arts and culture at London-based TriliTech (which works with entrepreneurs and artists to create projects on the Tezos blockchain), says that “there was an enormous amount of energy and speculation.” around NFTs during the pandemic,” with some buying them “as an investment piece or as a launch into the art world.” Many of these coins are now “less valuable than two years ago.” However, he says TriliTech continues to work with artists whose primary goal is to “find an audience,” and for many artists and collectors the goal is to “belong to a group of people” with tastes and similar interests.
The artistic NFT market has not gone into hibernation. Sotheby’s has continued to hold digital art auctions, including a small sale of Bitcoin ordinals (which work similarly to NFTs) in December and a larger one in January that brought in a total of 1.55 million dollars, as well as a generative art program which began last July with the sale of the works of Vera Molnár, a Hungarian artist who died in December at the age of 99, which brought in $1.2 million. (Generative art refers to computer-generated artwork determined by algorithms.) The auction house’s next generative art sale will take place in June and feature renowned French sculptor Bernar Venet, who will launch its first ever digital art project with this auction.
Michael Bouhanna, contemporary art specialist and head of digital art and NFT sales at Sotheby’s, says that a few galleries “have had an impact on the NFT market”, citing Gagosian and Pace, but that Sotheby’s and Christie’s, its main rival in the auction sector, have been “market leader, achieving first-to-market sales”. He points to “a shift in collectors” of NFTs over the past year toward “more mature, more educated” buyers, as opposed to those who entered the market in 2021, which has become “an area for more speculators.” interested”. making a quick profit.
Auction House Approval
Sotheby’s and Christie’s accept payment for digital art in crypto and, occasionally, for physical works of art. At Sotheby’s, Bouhanna estimates that about half of NFT buyers pay in crypto (even though it’s rare for physical art to be paid this way), while this is a “relatively rare event ”, according to Nicole Sales Giles, director of digital. art sales at Christie’s, “but we’re happy to do it” if a collector asks. “Many digital art buyers strongly believe in the future of crypto, and some prefer to settle in fiat currency. [government-backed currency] and hold onto their crypto for that reason,” says Sales Giles. On the auction house’s blockchain sales platform, Christie’s 3.0, “100% of payments and settlements are automatically made in Ethereum, because the platform is entirely on-chain.” She adds that crypto is not accepted as payment in any other department at Christie’s.
Bitcoin and other cryptocurrencies have gained wider acceptance in the financial industry this year, with the U.S. Securities and Exchange Commission (SEC) approving the launch of several Bitcoin exchange-traded funds (ETFs) in January, allowing shares of trusts holding cryptocurrency to be bought and sold on exchanges regulated by the SEC. Franklin Templeton Investments, which manages a portfolio of assets worth $1.3 trillion, launched the first on-chain money market fund in 2023, and BlackRock, the world’s largest asset manager, unveiled its own tokenized fund in March. The two companies, along with Fidelity, which launched its own Bitcoin fund in January (with assets of $6.9 billion), and others, “believe that tokenization will revolutionize the financial services industry in the world.” over the next five years,” says Edelman. “The era of ‘crypto bros’ is quickly coming to an end, and even if they managed to get 5% of the world’s population engaged in crypto, the financial services industry will engage the other 95%.” He adds: “We expect independent advisors to invest $150 billion in bitcoin over the next two years. »
Cryptocurrencies have been and remain riskier than government-backed money, such as the US dollar and the euro. As they are created through computers, hacking – including through quantum computing which could crack the encryption – can potentially lead to chaos in digital financial markets. In addition, flaws in the computer code, which have appeared twice with Bitcoin since 2010, could increase the volatility of the coin’s price.