Although it’s true that the rise of NFTs has caused major disruption to the worldwide art market, how this form of digital token is being bought, sold and distributed has come as equally as agitating to the art world.
To convey this process, NovaFori‘s CEO Garry Jones discusses the trails and trends of NFTs in this guest post for The Fintech Times.
The art market, sometimes thought of as insular and reluctant to innovate, has nevertheless seen a rapid migration into the digital world driven by online auction platforms and the explosive rise of NFTs. Yet the direction of travel isn’t one way. Online auctions are boosting the distribution of physical art as the technology drives a new era of fine art and collectibles by uniting physical and digital elements in a symbiotic ecosystem that benefits both collectors and those who facilitate their sale.
Online art auctions rise in prominence
A trend accelerated by the pandemic, leading auction houses such as Christie’s are fully embracing online auctions. Out of necessity, auction houses were able to retain some form of business normality amid the disruption, and the sector is now in rude health. A report by Hiscox found that online art sales reached a record $6.8 billion in the first six months of 2021 (72% up on the first half of 2020) and could hit a record-breaking $13.5 billion by the year-end.
A clear outcome in 2021 is that the online art market is here to stay. Not only has the transition opened up a broader range of geographical markets to auction houses and art sellers, but it has expanded the demographic of its customer base. Online auctions also hold far more appeal among younger people, for instance, who may be more inclined to use smartphones and tablets to attend. An estimated $3.125 billion, or 46% of online art sales in the first half of 2021 were sold through mobile devices such as smartphones and tablets according to Hiscox.
Aside from wider geographical reach and new customer demographics, the most innovative auction platforms can secure incredibly useful data-driven insights which help them to make the most of the changing customer base. In particular, those with machine learning functions can help auctioneers become attuned to the appetites of registered consumers based on their bidding history, allowing them to set pricing estimates more effectively.
The rise of NFTs in the art world
Online auctions have given auctioneers the opportunity to explore a new, non-traditional aspect of the business which is entirely online: Non-Fungible Tokens (NFTs). NFTs are traded via online marketplaces and their expanding popularity has brought them into the spotlight of investors and auctioneers alike.
Indeed, institutional auction houses have now begun to take stock of consumer confidence in this new breed of collectible. Following its landmark sale of digital artist Beeple’s “The First 5,000 Days” in March 2021 for more than $69m, Christie’s has now sold more than $100m worth of NFTs, not including the recent $29.8 million sale of Beeple’s “HUMAN ONE” artwork.
Although some critics think that NFTs are a flavour of the month status symbol and a passing trend, the sales figures are hard to ignore. DappRadar estimates that NFTs generated $1.2 billion in sales in July 2021 alone; more than half of the cumulative $2.5 billion sales volume in the first two quarters of the year. Therefore, the outlook for NFT sales remains optimistic and so does the outlook for the online auction infrastructure it sits upon.
Online auctions here to stay
As a result, online auction platforms stand to benefit from this developing trend, and a recent study into online art sales suggests that the shift to online is likely to outlast the pandemic. More than half (56%) of art buyers and 65% of online art platforms said they believed the switch to digital sales will be permanent. The platforms that facilitate online sales will retain their importance because of the variety of auctions they can accommodate, marking the continued convergence of the physical and digital worlds.
As in-person auctions return in some form, combining the physical and the digital art world will only grow in importance. This will most likely consist of hybrid events, where participants can attend online or in-person depending on their circumstances. Being able to leverage technology capable of offering enriched buyer and auctioneer experiences will increase in importance in the art world. Clearly, those auctioneers that look to capitalise on the digital transition and the rise of NFTs stand to benefit the most in the new age.