The world of art has always been a unique and exciting place. Intangible values are incorporated in the core of market dynamics, making emotional engagement part of the value proposition for each art piece.
The art market is also known for one more feature - extreme illiquidity. An art piece, once bought, cannot be easily resold. A handful of auction houses dominate a large portion of the secondary market. At the same time, art dealers cover the rest of the secondary market, closing private, non-transparent deals where the buyers’ and sellers’ identities are hidden.
Recently, the emergence of blockchain technology has brought a solution for price secrecy, unreliable provenance and forgery, and too few participants in the art market. Non-fungible tokens (NFTs) were, at first, deemed the magical solution for selling an art piece on the blockchain. However, they appeared a bit too early. The art market was still apprehensive of digital technologies and worshipping art fairs and live events.
And then it happened.
Due to the COVID-19 crisis and the closing of galleries, art fairs, real-life auctions, and art events, market participants were stuck at home, in front of their computer screens, with few options available to fulfill their passion for collecting. The market turned to the digital space, where we saw a surge in demand for online viewing rooms, digital auctions and virtual exhibitions. Market participants went through a crash course on digital tech, rushing to try all options to keep their business running.
Then, the time of NFTs came.
Even though the traditional art market was hesitant in the beginning, the money was not. Increasing numbers of new collectors emerged from the crypto space. Powered by the enormous gains from the current bull run, they started investing in NFTs as crypto-native digital assets. The value of crypto art registered as NFTs exploded, and it was not long before others followed. “Old sharks” of the traditional art market started paying attention, looking for their way in. And they found it. Christie's auction of Beeple’s NFT gave birth to the new norm in the art market -- the Digital can be art. Art can be NFT. Art can be sold for crypto.
After the auction dust settled, NFT prices plummeted, and a new challenge emerged -- how to handle the art market's transition to a new paradigm efficiently.