While art in the form of nonfungible tokens has been making headlines the past few months, the traditional art industry, with the exception of the major auction houses and a few high-profile artists, has approached the market with caution.
Despite the hype, what actually is the size of the NFT art market? How disruptive will it be? And what roles should the traditional industry player play in its future development?
In a report this week, London-based research and advisory company ArtTactic explored the global NFT art market to address these questions and look beyond the current frenzy.
“The rapid rise of the NFT market, but lack of research and information, presented us with an opportunity to start covering this area from the beginning, and to be able to follow and monitor its developments as we go forward,” Anders
founder and managing director of ArtTactic, told Penta in an email interview, regarding its NFT Art Market Report 2021, the group’s first analysis of the subject.
How Big Is the NFT Art Market?
Defining what constitutes “NFT art” is still evolving; it is as difficult as to define what’s art or what is not art, Petterson says.
There are two major categories of NFT art platforms, one is open, non-curated platforms such as OpenSea, the other is curated platforms such as Nifty Gateway and SuperRare, according to the report.
ArtTactic’s analysis focused on the NFT art and collectibles space as defined by the largest curated NFT platform, Nifty Gateway, which accounted for 71% of the US$437 million in NFT art sales during the first four months of 2021, according to data from Cryptoart.io.
Between February 2020 and April 2021, Nifty Gateway launched 3,009 NFTs with over 145,600 editions minted for purchase, representing digital artworks of 272 artists. The NFTs raised a total of US$305 million, according to the report.
Total sales in the primary market have been strong, with just over 139,000 editions sold, representing a sale-rate of 95.5% overall. The average price was US$1,228. The sales volume in the secondary market is almost half of the primary market, but the average sales price was higher, at $1,938 per NFT, according to the report.
In the first four months of 2021, Nifty Gateway launched 1,958 new NFTs, compared to only 49 NFTs during the same period in 2020. The sharp rise in the availability of new NFTs is linked directly to the increasing number of artists presenting their artwork online.
As of March, 60 new artists launched on the platform, an increase of 140% from the previous month. Overall, an average of 38 artists have launched each month in 2021, up from an average of 16 artists during the second half of 2020, the report said..
Within the overall NFT market, art has a market share of around 11%, based on the number of sales, according to the report.
Compared to the traditional art market, NFT art market volume is still almost negligible. The traditional art market totaled US$50.1 billion in 2020, with online sales totaling US$12.4 billion, according to the annual Art Market Report from Art Basel and UBS.
What Gave Rise to NFT Art?
“The rapid rise of the NFT market was probably an alignment of the stars—vast increase in crypto wealth on the back of exponentially rising Bitcoin prices, lots of celebrity endorsement and social media chatter,” Petterson says.
Crypto wealth has risen exponentially amid a 570% rise in Bitcoin prices, from around US$8,500 in March 2020 to above US$50,000 in March 2021. The crypto market is currently worth around US$2.5 trillion, according to CoinMarketCap.
“With crypto millionaires facing limited opportunities to diversify this wealth into the physical, real world—the crypto investment community has found solace in the emerging world of digital collectibles and NFTs,” Petterson says.
The extensive media coverage of NFTs in recent months has also generated a significant amount of hype in the market. The number of Google searches for “NFT” peaked in March, around the time of a work by the digital artist Beeple fetched a record US$69 million at Christie’s.
“Traditional high-end auction houses like Christie’s gave the NFT art market the final ‘premium’ endorsement,” Petterson says.
How Should Traditional Players Adapt?
The intersection between art and technology is here to stay; traditional art industry players should embrace the trend and participate in the future development of the NFT market, Petterson says.
“The NFT art market is very exciting and opens up new opportunities for artists to develop new markets and monetization models; and for collectors, it offers a new and attractive ownership model,” Petterson says.
The most successful NFT artist is
the artist known as Beeple, whose art has achieved a total of US$142.7 million. Next is
with US$42 million in sales, and then Hackatao with US$21.6 million in sales, according to the report, citing data from Cryptoart.io.
Major auction houses, including Christie’s, Sotheby’s, and
quickly understood the value of embracing NFTs both from a publicity point of view and as an instrument to help rejuvenate their ageing client base.
“They have carved out their position as the bridge between ‘old’ and ‘new’ art value systems. This might be a path to follow for other art market stakeholders,” Petterson says.