How to invest in art NFTs?

Not a day goes by without talking about NFTs, these digital identifiers that artists, auction houses, specialized platforms and galleries have taken over. How does it work and what can we expect from it?

According to a report by Chainalysis, $ 40.9 billion was spent in 2021 on the purchase of NFTs (Non Fungible Token) or non-fungible Tokens, these unique and inviolable digital identifiers that enable authentication any digital file (image, video, audio, tweet). Non-modifiable, they serve as a certificate of authenticity and constitute digital proof of origin and ownership of the files to which they are attached. NFTs are stored in a blockchain, a unique, decentralized, transparent and tamper-proof transaction register. But how to invest in an art NFT?

Exorbitant prices

Since the March 2021 sale of an NFT by designer Beeple at Christie’s for $ 69.3 million, records have multiplied in Anglo-Saxon auction houses. Also on specialized platforms: On December 6, Nifty Gateway distributed a set of 250,000 NFTs by artist Pak for a total of $ 91.8 million, which would make him the most expensive living artist in the world, given that this collection constitutes a single work … The enthusiasm is such that the French auction houses launched themselves during March 2021 (Ader, Rossini, Aguttes with the first SMS in the world awarded € 132,680 in the form of NFT on December 21). But French law forbidding them to sell “intangible property”, they only sold NFTs attached to “physical twins”: photographs, videos …

Three billion cryptocurrencies

The market for these arts or crypto-arts NFTs, defined as ” artistic creations, of which at least part of the work is found digitally on a blockchain ”, Amounted to per. December 31, 2021 to $ 2,542,028,317, for 77,307 sales to 122,311 buyers, according to Gauthier Zuppinger, co-founder of market analysis platform ” These figures are a first estimate regarding the Ethereum blockchain. To this must be added the volume of sales of crypto art from other blockchains and the auction houses Sotheby’s ($ 100M), Christie’s ($ 150M) and Phillips ($ 6.19M). “says the specialist.

Collection of NFTs from Yuga Labs, sold for 1.6 million.  EUR by Sotheby's on 9 September 2021.

Collection of NFTs from Yuga Labs, sold for 1.6 million. EUR by Sotheby’s on 9 September 2021.

A volatile market

Specifically, how does it work? A collector / investor who wants to acquire an art NFT must install a crypto wallet on his computer or smartphone, convert euros into Ethereum cryptocurrencies. Then connect this crypto wallet to a specialized platform like Opensea before buying a crypto art that he can resell to other people registered on the platform.

Dream on, NFT created by 25m42, presented by Hofa Gallery, in London.

Dream on, NFT created by 25m42, presented by Hofa Gallery, in London.

The crypto arts market is still very volatile: they are sold on average after 63 days at an average resale profit of $ 7097 in 2021 (figures as of December 9 from Fanny Lakoubay, crypto artist and NFT’s advisor at LAL Art Advisory, explains: “ Generative series (Profile-pic projects, collections of digital characters automatically generated by algorithms like CryptoPunks or Bored Ape Yacht Club) sell out extremely quickly as they are the subject of short-term speculation by a small number of people. for the most part have earned their fortunes in cryptocurrencies and concentrate the majority of the largest purchases. This makes the market very unstable and there is more supply than demand. The market is expected to decline and the value of the majority of these projects will be close to zero. On the other hand, the crypto art market, whose works are created by digital artists (such as XCOPY, Kevin Abosch or Pascal Boyart), should stabilize in the long run. Lucky collectors who invested a year ago saw the value of their crypto art collection increase by 300% at a fixed rate in Ethers. For collectors who want to invest today, it is in their interest to buy young digital artists, such as these artists in residence at Vertical Crypto Art, but this is still a very young market. According to a study conducted by the Nansen analytics platform for the Financial Times, this unregulated area is prone to fraud, deception and market manipulation, not least because the actual identities of buyers and sellers are difficult or even impossible to detect.

Screen Test (Pearl), 2021, auctioned at Foundation © Courtesy of the Artist and Almine Rech

Screen Test (Pearl), 2021, auctioned at Foundation © Courtesy of the Artist and Almine Rech

On the side of the galleries

A few French art galleries have embarked on the adventure of 2021 with average results: Almine Rech on the Nifty Gateway platform, Kamel Mennour on the SuperRare platform. The Art Basel Miami Beach fair tried in December last year to organize a “curated” exhibition of digital NFTs works, but it is clear that crypto art escapes the players in the traditional art market, with the exception of an auction house like Sotheby’s, which last October year launched its own NFT sales platform During the first quarter, two new marketplaces will try to attract traditional collectors: Artprice © with (after its competitor Artnet with in December) and CADAF.

Obvious, Bellum Tempus (2021).  Courtesy of the artist

Published, Bellum Tempus, 2021, sold for 9,999 ETH ($ 23,757) by the Kamel Mennour Gallery. Courtesy of the artist

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