Kobel's Art Weekly

Kobel's Art Weekly 31 2022

Is it still growing pains or are the digital purchase receipts called NFT already shrinking to normal size? In the third and final part of the seasonal review, there are signs of both.

The dominant theme of 2021 has been NFTs, whose market is nearly half the size of the art market, but which intersects with it only slightly. Dan Milmo explains in the Guardian, "The global market for non-fungible tokens hit $22bn (£16.5bn) this year as the craze for collections such as Bored Ape Yacht Club and Matrix avatars turned digital images into major investment assets. NFTs have drawn from veteran investors similar warnings to those issued about cryptocurrencies: that they are symptomatic of an unsustainable, digital gold rush. NFTs confer ownership of a unique digital item - whether a piece of virtual art by Damien Hirst or a jacket to be worn in the metaverse - upon someone, even if that item can be easily copied."

Shanti Esacalante-De Mattei summarizes the NFT year with examples at Artnews.

Traditional galleries, in their role as intermediaries and filters, also have a chance in this market, believes Reena Devi in mid-January in The Art Newspaper: "This gap is also noted by Jehan Chu, an art collector and the founder of Kenetic, a Hong Kong-based early-stage blockchain investment and trading firm. He foresees that, in the event of a downturn and a bear crypto market, the NFT community would prove too shallow to support the scene. [...] For all its independence, some artists and collectors in this new sector are waiting for mediators from the traditional art market to step in. 'From a direct-to-consumer standpoint, we're not seeing support from intermediaries, to add value, to add curation, to add criticism, which galleries or institutions do,' Chu says. As prices creep up, he predicts it will be harder for NFTs to exist in a vacuum as 'collectors will look to curators and institutions to help them make sense of why a Beeple work is worth $69.3m.'"

Stephanie Dieckvoss attests to a double-edged advantage of NFTs at the end of January in the Handelsblatt: "On the other hand, you don't have to know anything about art. That has always fascinated new groups of collectors. What can you buy if you don't know or aren't interested in classical education? This appeals to the technology-oriented, primarily male, young clientele of the NFT scene."

NFTs are probably more for amateurs, Christiaan Hetzner learned from authority in early February for Fortune: "While it swiftly sparked a gold rush among small investors hoping to get rich overnight by speculating on the right NFT collectible, the world's leading money manager to the uber-rich says that its discerning clients won't be jumping on the bandwagon anytime soon. Real institutional demand for NFTs? No, we don't see that,' UBS chief executive Ralph Hamers told reporters in an earnings call on Tuesday."

In a series of interviews worth reading, Tim Ackermann takes an approach to the NFT issue for WELTKUNST (free registration).

The promise of democracy in the NFT world is not far off, Ursula Scheer notes in the FAZ of February 12: "The fact that the biggest auction houses Sotheby's and Christie's (the latter seller of the notorious Beeple-NFT 'Everydays') are among the biggest headlines in the NFT business indicates that the democratizing power of tokens is not far off. According to a study published in 'Nature Scientific Reports' by mathematician Andrea Baronchelli of the City University of London, just ten percent of NFT buyers and sellers generate ninety percent of the revenue. Seventy-five percent of tokens cost an average of fifteen dollars, with only one percent moving into the staggering amount of over $1.5 million. Platforms like Open Sea, the largest NFT trading site, Super Rare, which focuses on curation and is a natural collaborator with traditional auction houses, and Foundation are the heavyweights of the new industry." I try to explain how a hollow gold cube in Central Park, bored monkeys and cryptocurrencies relate to art markets and capital in the Handelsblatt.

The hype around NFTs has not broadened the public's understanding of digital art, but rather narrowed it, Christiane Paul claims in The Art Newspaper: "The NFT boom has reduced the public image of digital art, which covers a broad range of creative expression, to individual reproducible digital images, animated gifs or video clips-the standard forms of digital collectibles and meme culture. There may be a segment of the crypto world that, through NFTs, has discovered the breadth and history of digital art and started supporting it, but that segment seems to represent only a small overlap in the Venn diagram of traditional art collectors and NFT collectors." This would probably make one of the main arguments of the NFT apologists invalid.

Shortly before the scheduled date, Sotheby's cancelled an auction of 104 CryptoPunks. Barbara Kutscher and Susanne Schreiber puzzled over the reasons at the end of February in the Handelsblatt: "Mike Hager, NFT expert, book author and coach, expresses two assumptions to Handelsblatt. 'A general rule of the stock market is to buy, not sell, when there is cannon fire,' Hager reflects. Almost at the same time as the auction started, Russian soldiers marched into Ukraine. 'But it could also be that the seller has a knowledge advantage,' the expert speculates. 'Possibly he knows about a circumstance that makes him expect that he could earn much more from the CryptoPunks in the future.'"

Analyzing the weakening of the NFT market, Miles Kruppa, Cristina Criddle and Tim Bradshaw write in the Financial Times, "By the end of 2021, nearly $41bn had been spent on NFTs - making the market almost as valuable as the global art market. But almost as rapidly, large portions of the market have begun to deteriorate, leaving novice investors with big losses and raising questions about the long term outlook for NFTs. The average selling price of an NFT has dropped more than 48 per cent since a November peak to around $2,500 over the past two weeks, according to data from the website NonFungible. Daily trading volumes on OpenSea, the largest marketplace for NFTs, have plummeted 80 per cent to roughly $50mn in March, just a month after they reached a record peak of $248mn in February."

This fits with Jörn Brien's report in mid-April at t3n that Amazon could soon sell NFTs.

The more Michael Moynihan explains the NFT world in his Youtube video for Vice in early May, the more disturbing the picture he conveys. Just under half an hour of conversation, including Artnet editor Ben Davis, art market Hans Dampf Kenny Schachter, ex-star artist Lucien Smith, Beeple buyer Metakovan and ... Pepe the Frog (mascot of QAnon and the Trumpists).

"Losing money with NFT", under this whimsical headline Ursula Scheer explains at the end of May in the FAZ how fraud works in the online world: "Phishing is the name of the scam, which had already been used to knit a scam around alleged Banksy NFT. The fact that it is possible to trade in the blockchain in a wonderfully anonymous and decentralized manner without intermediaries has its pitfalls. In the current year alone, the equivalent of around $1.3 billion in crypto assets is said to have been stolen. The hack of the Instagram account of the highly traded NFT collection 'Bored Ape Yacht Club' in April is also worth mentioning. Click, click, tokens for millions were already gone; three bruised collectors are now suing the trading platform OpenSea. They cannot hope to get their 'Apes' back: Once a transaction is completed on the blockchain, it cannot be reversed."

Reconciling the traditional and NFT art worlds is what a conference in Berlin in early June, attended by Annika von Taube for Monopol, is all about: "At one point in one of the talks, the question comes up: Are CryptoPunks art? 'Absolutely not!', find the old gatekeepers and 'Of course!' the native cryptoart worldlings. Who is right is currently still decided by the established evaluation construct of an evolved ecosystem, i.e. the 'old' art world. But the new one just has to stand on the shoulders of the old world, then both can grow bigger together and merge into one organism. And then there will be no more NFT art and traditional art. There will only be art."

How the various NFT platformers are reacting to the cryptocurrency crash is explored by Shanti Escalante De-Mattei at Artnews: "With the drop, the mourning has begun, even among a crypto-community used to weathering the asset's volatility. NFT platforms, however, are not wading through the five stages of grief before taking action. In quick succession, major NFT platforms like Foundation, SuperRare, and OpenSea have announced major changes to the way they run their businesses. While none of these pivots has been explicitly labeled as a response to the market, the timing and nature of the new initiatives seem designed to make up for the lack of enthusiasm in the market currently."

An overview of the serious NFT art scene has been compiled by Charlotte Kent for Artnews.