There are many different strategies for investing in art. While some people work primarily with art dealers, others prefer traditional auction houses for purchasing their art. Recently, the industry has begun to offer innovative ways to invest. For example, it offers fractured shares, making art investing more accessible, and non-fungible token (NFT) art.
Making headlines around the world, NFTs have become a new start for the art industry. An NFT is essentially a digital token representing a smart contract that is supported by blockchain. This means that NFTs allow for decentralized ownership of art through a secure and verified system, another way to make art more accessible to investors. However, NFTs can be confusing for many people.
A Closer Look at NFTs and What They Offer Investors
NFTs are essentially digital certificates that guarantee ownership of a particular asset, such as a piece of art. Importantly, NFTs do not just represent ownership of the art itself. Often, these investments come with a lot of utility, such as exclusive rights to reprint an image and benefit from its resale. Purchasing NFTs necessarily involves getting familiar with cryptocurrency, a decentralized method of payment that currently powers NFT platforms. The majority of NFTs are built on the Ethereum blockchain network, but other networks are also building a strong presence. It’s important to note that NFTs are not interchangeable, and you must know which network supports your particular NFT.
In the art world, NFTs have already been used to represent a wide array of different types of work. Investors can easily purchase digital media, video, photographs, musical compositions, or pieces of writing. For the most part, anything that would fall under the umbrella of digital art can be converted to an NFT; this also applies to any physical art that is converted into digital form.
Once a piece of work has been minted into an NFT, it is sold on a marketplace, which provides you with the exclusive rights to using the digital creation or the ability to collect royalties from others who choose to use the art online. Recently, NFTs have traded at top auction houses including Sotheby’s and Christie’s, solidifying the place of these assets among art collectors.
How Investing in Art NFTs Compares to Traditional Investments
NFT art remains a highly speculative investment. However, this is also true of traditional art investing since the value of creative work remains incredibly subjective. Many intangible factors must be considered to calculate the value of the piece, such as the artist’s reputation and the scarcity of their work. These and many other factors influence how much a collector is willing to pay for a piece of art, which is true of both digital and traditional art. However, traditional art has the benefit of a much longer history of demand and trends. This makes the value of art somewhat more predictable. While NFTs have become very popular among some art collectors, there is always the chance they will be a fad that falls out of favor.
However, investing in NFT art does have one advantage over traditional art: it can be displayed and managed daily through the digital marketplace according to the investor’s wishes. Thus, the value of these art assets is determined much more frequently than with traditional art pieces, which are often stored out of view for decades before an additional sale happens. With that additional sale, the value can only be projected based on a few data points. NFTs can create many more data points in a small timeframe to help support investment decisions.
The NFT Art That Has Generated the Biggest Stirs in the Industry
NFT art is still very much in its infancy, with marketplaces and options likely expanding exponentially in the years to come. However, several works have already created a lot of buzz, pushing investor interest in these unique assets. One of the earliest success stories is CryptoPunks, which comes from Larva Labs. The project involved 10,000 pixelated portraits of characters on the Ethereum network that were given away for free in 2017. Since that time, the collection has had a strong following, with some portraits reselling for millions of dollars.
Pak, either an individual artist or a team, has also had a lot of success. Their pieces The Merge sold for $91.8 million, and Clock sold for $52.7 million.
Some artist identities are more straightforward. For example, Mike Winkelmann is an individual artist known as Beeple. He has emerged as a top NFT creator, with pieces taking in more than $69 million at a Christie’s auction. Beeple made headlines with this sale, playing a large role in making art NFTs mainstream.
