The global pandemic caused investors to seek new markets and, at a glance, NFTs offered a secure alternative to traditional fine art investments. Each work is unique, and an NFT does not need upkeep or conservation, like a print. Its provenance is also transparent thanks to blockchain technology.
NFTs can also be more empowering for artists, as they can bypass the traditional gallery system and make sales with users directly. Each new sale of an artist’s NFT can automatically provide a resale fee, if this is written into the NFT’s smart contract (see NFT Glossary). The democratic nature of NFTs may be attractive to young buyers looking to align their spending with their ethical values.
But trends do not always translate to return on investment, and the recent crash of the cryptocurrency market is telling of this. After all, there was the cryptocurrency bubble in 2017-18 and, before that, the dot-com crash in the late 1990s. The skyrocketing price of cryptoart in 2020 and 2021 could have also been artificial. The buyer of the $69.3million Beeple NFT – who is only known by his pseudonym, Metakovan – is also the founder of Metapurse, a fund that collects NFTs. The underbidder of the sale was Justin Sun, founder of the blockchain network BitTorrent. An increase in the popularity of NFTs is beneficial to their companies.
It is also questionable how long Christie’s will offer NFTs. The auction house recently announced their new sustainability initiative to become net-zero by 2030. The sale of NFTs, however, uses significant amounts of electricity – the average NFT has a carbon footprint “equivalent to more than a month’s worth of electricity for a person living in the EU”, reported The Verge. Only time will tell if cryptoart investment can flourish without the endorsement of blue-chip auction houses.
“Art theft has never been this aggressive and rampant.”
NFTs are not always fraud-free, despite their blockchain technology. Anyone can, theoretically, register themselves as the original creator of an artwork. In 2018, British coder Terence Eden registered himself as the maker of the Mona Lisa on Verisart, a company offering blockchain certification for art and collectables. It was laughed off as a stunt – but maybe it shouldn’t have been. Now, “art theft has never been this aggressive and rampant ever before,” says artist Chris Moschler. Over 30 Twitter accounts have tried to ‘mint’ NFTs of Moschler’s art tweets and profit from his work.
In exceptional circumstances, an artist can even change their NFT after its sale. The cryptoartist Neitherconfirm in 2021 changed the images associated with his NFTs, from portraits to antique carpets, in a stunt to ‘pull the rug’ on an NFT’s value. “It is pretty easy to change the jpg, even if it does not belong to me or it is on auction. I am the artist, my decision, right?” tweeted Neitherconfirm, adding in another tweet, “What is the meaning of creating an unforgeable token on a highly secured network if someone can alter, relink or destroy your possession?”
Ultimately, the NFT market is still new and it may be too early to analyse its benefits and returns. “If you want to buy an asset as an investment, ideally you should do it because you have done your homework and you believe that over the longer term that investment will rise,” Susannah Streeter, senior analyst at Hargreaves Lansdown, said to the BBC. “At the moment some people are buying these types of assets for short-term speculative gain… but then the craze is likely to move onto the next big thing and the asset could end up being worth nothing.”