[Art] History Repeats Itself: A Warning on the Current NFT Market

By Cheyenne Assil

November 11, 2021

[Art] History Repeats Itself: A Warning on the Current NFT Market

Beeple’s HUMAN ONE, 2021. Kinetic video sculpture with corresponding dynamic NFT. Sold for $25 million (hammer price)  in the 21st Century Evening Sale on 9 November 2021 at Christie’s in New York.


Following the historic March 2021 sale of Everydays: The First 5,000 Days by Mike Winkelmann, commonly recognized as Beeple, NFTs quickly became the hot topic of the art world. It seemed as if everyone in the industry had an opinion on them — some raving about incorporating the crypto world into art, and many skeptical, seeing it as a way of reducing art to a purely financial asset. Established artists spoke out against NFTs, such as David Hockney, who called them “silly little things”, following the historical trend of the traditional art market initially rejecting technological innovation. April 2021 saw a 39% drop in sales compared to the previous month which, for a moment might have indicated NFT skeptics were correct. However, today’s market has proven otherwise. Sales are back up — August 2021 levels peaking at almost 6 times higher than previous highs seen in March 2021.


This recent momentum in the NFT art market has led to a rise in recognition and acceptance. The traditional pillars of the art world — auction houses, galleries, and museums — many of whom originally rejected and wrote off the digital tokens, are making moves to incorporate NFTs into their art businesses. As a result of this momentum, the traditional art world is beginning to play catch up, finding new ways into the NFT market and access to the expanded clientele the crypto world offers. Many established artists are adding NFTs to their oeuvre including Damien Hirst and Urs Fischer. PACE Gallery has established a platform solely dedicated to the showing and selling of NFTs, signifying blue-chip acceptance of the digital medium. Computerized images and crypto collectibles such as Crypto Punks and Bored Ape Yacht Club are gaining momentum as well, creating communities around themselves while new ways to view and purchase the tokens are being established.


It seems pointless to add my opinion on whether NFTs are “good” or “bad” or try to speculate what I think their future role and place in the market will be. What I can do is investigate their current place in the market, expanded upon in our second NFT Art Market Report, and offer a warning based on a comparison to the current trajectory of this emerging market and that of the traditional art market.


Although NFTs offer a new client base for the art world, this market and its interactions with the traditional market sectors deserves further investigation. Client strategy likely plays a large role in the acceptance of NFTs by artists, auction houses and galleries. Alex Rotter, Christie’s Chairman of Postwar and Contemporary Art in New York tells Fortune Magazine that for the sale of Everydays: the First 5,000 Days the auction house signed up more new clients than ever before, indicating that NFTs offer an “entirely new category of buyers”.  Looking at the press release following this groundbreaking Christie’s sale we can see that 91% of the bidders were new to Christie’s, becoming clients of the auction house for the sale of an NFT. This is important to understand as Art Basel’s 2020 Market Report shows that buyers between the age of 40 and 64 currently represent the biggest segment for dealers and account for 62% of buyers in 2019. The Art Basel report finds that the Contemporary art market has the largest share of young buyers, with only 21% of collectors categorized as Millennials. In comparison, 58% of the participants in the Beeple auction were Millennials, exemplifying the expanded client base that crypto art offers. Tapping into the Millennial pool will be a very important move for the art market as the Art Basel 2021 Report found that “Millennial HNW collectors were the highest spenders in 2020, with 30% having spent over $1 million versus 17% of Boomers”. In May, Sotheby’s became the first auction house to accept cryptocurrency, a move that Stefan Pepe, Sotheby’s Chief Technology Officer said will help the auction house find new “ways to expand our client base” by taking the necessary steps to accommodate their interests.


Auction houses aim to introduce new markets to their clients and cross market categories. This can be seen by Sotheby’s July 2020 cross-category evening sale ‘Rembrandt to Richter’ which included Old Masters, Impressionist, Modern, and Contemporary art in one auction, introducing lots to buyers who may have never previously sought them out. This tactic of crossing market categories has been incorporated by all the large auction houses, and is being used to tap into the market offered by NFTs. One example is Christie’s inclusion of the NFT crypto collectible “YUGO LABS” which is part of the Bored Ape Yacht Club NFT series in their recent evening sale in London. Further, twelve of the ninety-four lots sold at Sotheby’s recent Contemporary Art Day Auction accepted bids in cryptocurrency, offering a physical object to accompany the NFT. This strategy gave new bidders something tangible as to ease their way into the crypto-verse. The NFT market is fueled by a new generation of collectors and investors that the traditional art world is eager to retain.


It may seem like the new market of wealthy young collectors have the potential to diversify the art market and broaden the art buying clientele, but closer examination proves otherwise. The exciting space for growth offered by the crypto-sphere has led the art world to take steps to incorporate non-fungible tokens into their vocabulary but dissecting these sales further shows that these tactics have not led to a merge of markets. While the spaces for buying art may be moving to merge the traditional and NFT markets, the buying groups remain different creating a heterogeneous mix of fine art and crypto art buyers. An investigation by The New York Times dissects the market gap between “speculative buyers” who “flock to crypto art” and the traditional blue-chip collectors who hold back from this market. Surveying more than a dozen collectors, the New York Times finds that the majority of established dealers and their collectors have more reluctance about NFTs and what they can offer, keeping them away from the market. These art world personnel have “concerns about the quality, ownership and authenticity of NFTs”. Meanwhile, those who invest in NFTs traditionally belong to the crypto community and have historically made and/or spent their wealth on cryptocurrencies. For example, Chris Ciobanica, known as SilverSurfer to the community, has collected more than $10 million worth of NFTs. Despite his heavy involvement with the digital art community, Ciobanica says “I’d never collected traditional art” before his involvement with the digital tokens. Out of the top 10 most expensive NFTs sold, the owners who are not anonymous come from the crypto world rather than the art world.


Tina Rivers Ryan, a curator at the Albright-Knox Art Gallery in Buffalo says to the New York Times that “There is a sense that a parallel art market is emerging that comprises a new set of artists and a new set of collectors”.  The “parallel” market of NFTs which offers new artists and collectors eerily mimics the flaws of the established art market. Although they pull from two different client bases and sources of wealth, their demographics are the same. Without bringing attention to these shortcomings, the potential for this new and innovative space for art risks falling victim to the long tradition of race, gender, and geographic biases that the canon of art history presents.


The NFT art market, generating over $3.5 billion in just the first 9 months of 2021, addresses art world problems such as ownership of work, provenance, authenticity, and artist royalties. This model may be able to overcome some of the key issues found in the traditional art world, yet perpetuates its problematic foundation. Less than 16% of all NFT artists are female, which is less than the 39% of female artists represented by dealers working in the primary market in 2020 (according to Art Basel’s 2021 Market Report). Further, more than 73% of the creators are from England, America, or Canada. The majority of these artists live and create work from North America, mainly the United States which accounts for 91% of artists. Looking at the global distribution of NFT artists on the platform NiftyGateway the discrepancy in demographics is apparent. Of the NFT creators, less than 4% are from Africa and only 2.4% of the artists are from Latin America. Creators from the Near East are even more minimal, making up only 0.03% of the artists and contributing only 0.01% of the total sale value. Breaking up the global distribution by country, the top represented countries are all European or American, with Argentina breaking the trend generating the tenth highest total sales value on NiftyGateway.


The traditional art market has a history of overlooking players who fall out of the narrative of the West. It is rooted in a history that has only validated white males from Europe and America, and builds off of a canon that marginalizes those who challenge this norm, establishing a foundational bias for who could be considered an artist. There was no space or opportunity for those who fell outside of this norm which transitioned into artists today being “othered” and reduced to representations of their difference rather than creators in their own right.


Currently, artists and art institutions struggle to address the colonialist roots that lay the foundation of the art world. As a result, underrepresented groups continue to be neglected and marginalized. The NFT world has existed for seven years, but only became popular in the last two. In its short time the new creative sphere has begun to mirror art history’s exclusionary chronicle, but it has the opportunity to deviate from the foundations laid. We must stop and think if this is a history we really want to continue to follow, address the current state of the market, and ask what steps we can take to break from this trend. The digital world of NFTs offers more accessibility and amenities for art as well as a new place that has the potential to create an equitable ecosystem. To truly capitalize on this potential, we must bring attention to the current failures and avoid continuing along the path set out.