Can we expect a sustainable NFT art market?

Building on The Art+Tech report, Vienna Kim's analysis of the NFT art market provides important insight into the present and the future.

Jul 20, 2022 Art

4 weeks ago

In October 2021, the centuries-old auction house Sotheby’s announced the launch of “Sotheby’s Meta,” their Web3 and NFT arm, dedicated to the sale of ‘rare NFTs.’ Similar initiatives were pursued by the blue-chip gallery Pace, with Pace Verso, and König Gallery, with misa.art. As bastions of the old-money fine art world, what interest do these auction houses and galleries have in NFTs,  digital assets built on the blockchain that are inherently based on the notions of decentralisation, immutability, and transparency–values that have typically been sidelined in the traditional art market? While one may wager that the capital gain to be had in NFTs may be the primary motivator for these businesses, the integration of these Web3 extensions also poses a critical question for the future of the digitalisation of the art market: how compatible are the art market and NFTs, and can there be a sustainable, fruitful art NFT dealership in the traditional art world, and vice versa?

The first step towards answering this question may be by asking: “Who are NFT Art Collectors?” and “What the heck is an art NFT, anyway?” In April this year, The Art+Tech Report published a key study on “NFT Art Collecting,” in which they defined ‘art NFTs’ as the following: “the term ‘art NFT’ is used in contrast to NFTs in general as well as NFT collectibles (such as the Bored Ape Yacht Club or CryptoPunks). Naturally, we want to avoid a restrictive definition of what counts as ‘art’ and what does not. But for practical purposes, we’re using the term ‘art NFT’ to single out NFTs that are collected by a specific audience with distinct motivations.” In other words, The Art+Tech Report considers that art NFTs are digital assets created in  an “art for art’s sake” manner, collected by individuals whose motivations lean towards collecting art as an end means.

Source: The Art+Tech Report. ‘Art NFT Collecting’, page 4.
Source: The Art+Tech Report. ‘Art NFT Collecting’, page 4.

Who are NFT art collectors?

The Art+Tech Report unveils interesting collecting habits from a sample of 306 participants in their anonymous survey. The participants were relatively evenly split in terms of gender, with 46% of participants identifying as male, 43% identifying as female, and 11% preferring not to say. The majority of respondents (53%) were millennials (aged between 26 – 41 years old), with Generation X constituting the second largest demographic in terms of age at 36% (aged 42 – 57). Given the perception that many who enter the NFT space tend to be on the younger side (mostly millennial and Gen Z), it is interesting to note that collectors of art NFTs swayed slightly older. Most importantly, the majority (79%) of participants in the report already owned art from the traditional art market. This may correlate with the slightly older demographic of the respondents, due to the fact that traditional art collectors tend to be Generation X or older, with wealthy millennials slowly taking up more space in the market.

Though demographics are interesting to note, it is the collecting habits of these NFT art collectors that reveal the most pertinent results. Despite the critique that NFTs are a purely speculative market, NFT art collectors demonstrated that return on investments were not the primary driver. The most common collecting strategy was to buy based on a “specific collecting concept” (42%), and a whopping 71% of collectors stated that they bought from their favorite artists. 54% of collectors also expressed that they were interested in supporting emerging artists that showed potential. Only 7% of participants divulged that they collect NFT artworks primarily for a return on investment 1.

In terms of the “specific collecting concept” that collectors are looking for, a strong idea behind the artwork itself, and/or inventive use of the blockchain were the two main motivations for buying an art NFT. This point is important to highlight, as it demonstrates an approach to NFT collecting that resembles the way a traditional collector might approach acquiring a painting, sculpture, or photograph. For example, the Cubism of Pablo Picasso and Georges Braque changed the way perspective was perceived in painting. Alfred Stieglitz was a key figure in establishing photography as a fine art form through his refined sense of composition and softened light. In the same vein, NFT art collectors are asking: ‘How does blockchain technology advance a new medium and cement a novel artistic movement into art history?’ or ‘How do the ideas behind this digital art piece capture the technological moment of our times?’ Indeed, when asked what the main incentive behind buying an art NFT was, collectors responded, “I want to support digital artists” and “I want to foster a new cultural paradigm,” with “I like the aesthetics of visual art” and “I believe in the revolutionary potential of Web3” coming in close third and fourth place. Though NFT art collectors are similar to traditional collectors when it comes to collection strategy and demographics, therefore, the motivations for collecting reveal that NFT art collectors remain a group that are more Web3-savvy, and almost revolutionary, in their thinking towards the future of society and technology.

Source: The Art+Tech Report. ‘Art NFT Collecting’, page 7.

The Current State of the NFT Art Market

Many statistics and reports regarding the NFT art market often combine collectible NFTs (such as PFPs) with NFTs that are made with an ‘art for art’s sake’ mentality. For this reason, it is difficult to find an accurate value of how many exclusively art NFTs have been sold in the past year, and what percentage of total NFT sales constitute artworks, specifically. That being said, a few key figures can illuminate the current state of the NFT art market today. According to Artprice, NFTs took up 5% of Contemporary Art  sales in traditional auction houses in 2020 and 2021. In four months, the category accumulated $127.6 million USD in auction sales, which represents double the turnover generated by the Photography category. This, too, with just 100 NFTs on sale, versus 6500 photographs. In addition, the unsold rate for NFTs is significantly lower than other auction categories, with only 6% of NFT lots going unsold, versus an average of 30% across all the other media (such as painting, sculpture, photography, print, etc.).2 Though the sample size of NFT sales in auction houses is small, these statistics already begin to demonstrate the interest and demand for NFTs within a traditional art market structure. Crypto collectors seem to be flocking to traditional art institutions to purchase NFTs on auction, perhaps with a desire to legitimize their NFT art collections with a big-name auction house or blue-chip gallery.

For a macro view of the NFT art market, the Art Basel and UBS Global Art Market Report 2022 dedicated a section to NFTs in their report this year, and provides one of the most salient readings of the art-specific NFT market to date, with thanks to data supplied by Nonfungible. According to this data, the value of art NFT sales have grown over a hundred-fold year-on-year in 2021, obtaining $2.6 billion USD in sales for the art category alone. To illustrate the incredible growth of this sector, it should be noted that art NFTs, in contrast to collectible NFTs such as PFPs, constituted only 2% of all NFT sales in 2019. By 2020, the art NFT category grew rapidly, obtaining 24% of all sales, against 12% for collectibles, and therefore surpassing the latter category. Once again, the figures show that the market for art NFTs is increasing rapidly, and the desire from collectors, both crypto and traditional, for this medium seems to be rising. In 2021, art and collectibles combined became the largest category in NFT sales, taking 63% of the pie, but this time only 14% was attributed to art NFTs exclusively.3 This could be due to the ‘PFP summer’ that took place in 2021, where the appetite for collectibles skyrocketed, and has held interest well into 2022. The turn back to collectible NFTs demonstrates that although the general interest in art NFTs has been growing at a rapid pace, the market is incredibly competitive and accelerated. Interests of crypto collectors are thus often diverted to new developments, projects, and media as and when they appear. The main take away from these findings is that although there is significant growth in NFT art sales, the figures fluctuate due to the unpredictable nature of the market.

Source: Artprice. ‘The Viral Madness of NFTs‘.

Notes for a future NFT art market

It is no secret that crypto is a volatile asset, and NFTs even more so. What are some steps art businesses can take to foster a more sustainable NFT art market? 

According to the Art+Tech Report, curation is king. Amongst those surveyed, 57% of individuals stated that curated exhibitions that inspire, educate, and sell would prompt them to acquire more NFT artworks. A more targeted curation and selection from a platform was the second most common answer, with 46% of respondents expressing that this was important. On the other hand, the key barrier to collecting more NFTs was the focus on speculation, rather than artistic merit. Anders Petterson, Founder and Managing Director of ArtTactic, an art market analysis firm that published two NFT market reports in 2021, confirmed that there is still a lot of scepticism around NFTs amongst traditional art collectors. “I think the frenzy and valuation of PFPs hasn’t helped the image of the market,” he states, continuing, “However, I think this is a transitionary stage. […] As the traditional art market starts to embrace NFTs, which is already happening, […] we might start to see more interest and confidence among traditional collectors.”

This doesn’t mean that the speculative aspect of NFTs will fade. According to Petterson, both the speculative NFT market and a more curated, art-focussed NFT offering will co-exist, appealing to different types of collectors. “Financial motivations will always be a key driver of any market, but I think a less speculative, more content-driven collector base is likely to emerge, which will be more aligned with how artists want to operate within the NFT market.” This content-driven, curated approach is thus the NFT business model that will most likely attract traditional art collectors, but also prominent artists, who are intrigued by blockchain technology and NFTs, but are hesitant to enter due to the unstable image of the scene. The proliferation of leading contemporary artists creating NFTs will naturally attract and introduce more collectors, and vice versa, and so the cycle continues. In addition, it is important to re-emphasise that collectors of art NFTs are also collectors of physical art, and so bringing art out of the wallet and allowing collectors to enjoy their digital artworks as they would with any other medium is a crucial incentive for these individuals. 

To conclude: Can the NFT art market become more sustainable? Will it ever be considered a serious art form? When approaching art NFTs, businesses should be aiming to bridge Web2 and Web3, applying the customs of traditional art collectorship to NFTs, and vice versa. Museum-worthy curation, the ability to enjoy NFT artworks as artworks in real life, and the sense of community that Web3 and NFTs are so famous for, are the key motivations and applications required for introducing and, most importantly, keeping collectors in the NFT art market. This formula is the most likely recipe that will produce a viable, robust market that will endure the bulls and bears, and be written into art history books. With these codes and combinations at hand, the art world will likely see a merging of interests from both traditional art and crypto collectors, bringing a level of sustainability to the NFT art market, and a touch of WAGMI to the traditional art sector.

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Vienna Kim

Vienna Kim is an art professional with a specialization in new media and technologies. After her Bachelor’s in Art History from the University of St Andrews, and her Master’s in Art Business from the Sotheby’s Institute of Art, London, Vienna has dedicated her career to the intersection of the traditional art market and technology. She has worked as a freelance writer for five years, exploring a range of topics such as how the blockchain can empower African artists, Susan Sontag’s ‘Notes on Camp’ and the Met Gala, and various exhibition reviews and artist spotlights. Now based in Paris, France, Vienna is the Artistic Manager at digital art and NFT company ARTPOINT. She likes talking about games and NFTs.

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