Source: Financial Times
Compiled by: Kris
“The crypto friends are gone. As soon as the music stops, they flee,” said art consultant Wendy Goldsmith in the solemn surroundings of the Grand Palais during Art Basel in Paris in October. But now, as Bitcoin continues to break new highs and Ethereum is approaching its 2021 peak, the art industry’s previously high hopes for cryptocurrencies are also eager to try.
Early signs suggest that the pioneering art industry game-changer is gaining traction. Cryptocurrencies have surged in the weeks following the reelection of U.S. President Donald Trump, who has shown strong support for decentralized digital assets. Just before that, Justin Sun, founder of crypto platform Tron, bought Maurizio Cattelan’s The Comedian (2019) for $6.2 million at a Sotheby’s auction in New York. In fact, it was just a banana taped to the wall. The sky-high auction price made it to the headlines of most media outlets. He paid for the purchase in cryptocurrency.
Against this backdrop, next month, Sotheby’s will accept ETH or BTC as payment at its first auction in Saudi Arabia, the first time a traditional auction house will support cryptocurrency payments throughout a live auction of a physical sale. Sotheby’s said the change could add an additional buyer group to the auction house in a region with strong digital art and cryptocurrency activity. The auction, which features 119 lots, includes Western and Saudi modern and contemporary art, luxury goods and a jersey worn by football player Cristiano Ronaldo, as well as generative “AI data paintings” by leading practitioner Refik Anadol. His monumental work Machine Illusion – Space | Chapter 2: Mars (2021), which uses data from a space telescope to create a surreal organic landscape, is estimated at $800,000 to $1.2 million.
In fact, before the outbreak of the COVID-19 pandemic, the art market had difficulty attracting people from the tech world due to its inherent conflict of style. The rise of non-fungible tokens (NFTs) has indeed brought some new cryptocurrency millionaires and billionaires. NF is a unique digital asset that connects art with blockchain and can be used to create geometric abstract paintings and cartoon comics.
In 2021, Christie's and Sotheby's began accepting cryptocurrency for some physical artworks, after Christie's auctioned Beeple's "Everydays: the First 5000 Days," an NFT that stitched together 5,000 digital images, many of which were satirical, even including a giant naked Trump sitting on the Capitol. Its final buyer was Vignesh Sundaresan, also known as Metakovan, the founder of the crypto investment fund Metapurse, who bought the artwork for a staggering $69 million.
Since then, eligible physical works have begun to skew toward tech-savvy, including a bright yellow 1984 painting by Keith Haring depicting a crowd mesmerized by computers, which sold at Christie’s for £4.3 million, though the auction house would not confirm whether it had accepted offers to pay in cryptocurrency. Christie’s accepts other currencies on the condition that the seller is willing to accept cryptocurrency, while bidding remains in local fiat currency, as do the auction house’s fees; Sotheby’s itself does not hold cryptocurrency. Now, each of the well-known auction houses has its own NFT and digital art platform, namely Sotheby’s Metaverse and Christie’s 3.0, where sellers and buyers can use cryptocurrency.
For the art market, practitioners hope that using NFTs and their associated alternative currencies can broaden the channels for new buyers to enter the usually more expensive art field. Masayoshi Son has made this journey himself - spending more than $6.2 million in the process. In early 2021, he purchased screensaver-style "cube" NFT works by digital artist Murat Pak, which were sold through Sotheby's on the dedicated Nifty Gateway platform for $1,500 each.
A few months later, according to Son’s social media, he paid HK$2.5 million (about $300,000) for Untitled (Kimpson) (2001), a painting by the in-demand KAWS that features the artist’s cartoon character with eyes drawn in the shape of an X and sealed in a blister pack. Just five months later, Son made a foray into heavyweight modern art, paying $78 million for Alberto Giacometti’s “The Nose,” a 1965 cast depicting a long-nosed head in a cage.
But despite this, not everyone in the art market is optimistic about the impact of cryptocurrencies. Goldsmith assessed the atmosphere during the Paris Fair and believed that the market atmosphere was stable and far-sighted, and undoubtedly free from the turmoil caused by cryptocurrency speculators. The reason is that the image of crypto as mainly young buyers is also incompatible with the current situation of the art auction market itself lacking diversity. There is also a long-standing objective fact that new entrants are often viewed with suspicion. After all, the art market is largely conservative and closed.
In this tricky market, suspicion and concerns about the user population are only superficial reasons, and concerns about the purpose are the core issue. The appeal of art - in a secret market that can convert unstable book profits into transferable tangible assets - is enough to make it much more attractive to money launderers, and encrypted NFTs are more likely to become a new playground for money laundering.
In China, cryptocurrencies are banned “due to numerous anti-money laundering cases,” Angell Xi, a partner at Chinese law firm Jingtian & Gongcheng, wrote in the Art Basel and UBS Art Market Report 2024. In the European Union, the latest anti-money laundering and terrorist financing rules tighten all businesses that provide services related to crypto assets, including a ban on anonymous payments.
The auction house’s compliance teams are ready and relatively cautious about cryptocurrencies. Outside of dedicated NFT platforms, only a few auction works were eligible until Sotheby’s Saudi sale on February 8, and Christie’s said its NFT sales to date have reached $150 million, including Beeple and his fees.
So far, NFT has been cold and the market has lost most of its heat, but as the market improves, there will be a turnaround in the future. According to the "Global Art Market Outlook" released by ArtTactic this week, 12% of experts are optimistic about the performance of NFT this year, which is still far lower than the previous high of 73% in 2023, but twice as much as in 2024.
Meanwhile, Christie's said the average age of its NFT buyers was 42, compared with the average age of 54 for all auctions. This is in line with Christie's strategy to position its business towards a younger generation, a key strategy highlighted by Christie's new CEO Bonnie Brennan last week, who said her plan is to "preserve cultural heritage while focusing on innovation - attracting new audiences, regions and technologies."
In fact, the art market has been in a clear downturn over the past two years and is in urgent need of fresh blood. According to ArtTactic, the total auction sales of Sotheby's, Christie's and Phillips auction houses will fall by 26% in 2024 and 19% in 2023.
In this context, perhaps any bit of traffic that can be captured is beneficial. Therefore, as the cryptocurrency stage lights up again, auction houses fighting a desperate battle can only prepare to join this drama.
