Author: Financial Times; Compiler: Kris 陀螺财经
"The friends of cryptocurrency have gone. As soon as the music stopped, they immediately fled." During the Art Basel in Paris in October, art consultant Wendy Goldsmith said in the solemn environment of the Grand Palais in Paris. But now, as Bitcoin continues to break new highs and Ethereum is approaching its 2021 peak, people in the art industry who had previously placed high hopes on cryptocurrencies are also eager to try.
Early signs show that the pioneering art industry changers have indeed gained popularity. Cryptocurrencies rose rapidly in the weeks after US President Donald Trump was re-elected, and Trump showed his determination to strongly support decentralized digital assets. Just before that, Justin Sun, founder of the crypto platform Tron, bought Maurizio Cattelan's "The Comedian" (2019) for $6.2 million at a Sotheby's auction in New York. In fact, it was just a banana taped to the wall. The sky-high auction price made it to the headlines of most media. He paid for the purchase with cryptocurrency.
Against this backdrop, next month, Sotheby's will accept ETH or BTC as payment at its first auction in Saudi Arabia, the first time a traditional auction house has supported cryptocurrency payments throughout a live auction of a physical auction. Sotheby's said that in a region where digital art and cryptocurrency activities are very active, this change can add an additional group of buyers to the auction house. The auction has a total of 119 lots, including modern and contemporary art from the West and Saudi Arabia, luxury goods and a jersey worn by football player Cristiano Ronaldo, as well as a generative "AI data painting" created by leading practitioner Refik Anadol. His monumental work, Machine Illusion — Space | Chapter Two: Mars (2021), uses data from a space telescope to create a surreal, organic landscape and is estimated at $800,000 to $1.2 million.
In fact, before the outbreak of the coronavirus, the art market had a hard time attracting people from the tech world due to its inherent conflict of style. The rise of non-fungible tokens (NFTs) has indeed created some new cryptocurrency millionaires and billionaires. NFs are unique digital assets that connect art to blockchain and can be used to create geometric abstract paintings and cartoons.
In 2021, Christie's and Sotheby's began accepting cryptocurrency to purchase some physical artworks after Christie's auctioned Beeple's Everydays: the First 5000 Days, an NFT that stitched together 5,000 digital images, many of which were satirical, even including a giant naked Trump sitting on the Capitol. Its eventual buyer was Vignesh Sundaresan, aka Metakovan, founder of crypto investment fund Metapurse, who paid a staggering $69 million for the artwork.
Since then, eligible physical works have begun to skew toward the tech-savvy, including a bright yellow 1984 painting by Keith Haring depicting a crowd mesmerized by computers, which sold at Christie’s for £4.3 million, though the auction house would not confirm whether it had accepted offers to pay in crypto. Christie’s accepts other currencies on the condition that sellers are willing to accept crypto, while bidding remains in local fiat currency, as do the auction house’s fees; Sotheby’s itself does not hold crypto. Now, each of the prominent auction houses has its own NFT and digital art platform, Sotheby’s Metaverse and Christie’s 3.0, where both sellers and buyers can use crypto.
For the art market, practitioners hope that using NFTs and their associated alternative currencies can broaden the channels for new buyers to enter the usually more expensive field of art. Masayoshi Son has made this journey himself - spending more than $6.2 million in the process. In early 2021, he purchased screensaver-style "cube" NFT works by digital artist Murat Pak, which were sold through Sotheby's on the dedicated Nifty Gateway platform for $1,500 each.
A few months later, according to Masayoshi Son's social media, he paid 2.5 million Hong Kong dollars (about $300,000) for "Untitled (Kimpson)" (2001), a painting by the in-demand KAWS that features the artist's cartoon character with eyes drawn in the shape of an X and sealed in a blister pack. Just five months later, Son made a foray into heavyweight modern art, paying $78 million for Alberto Giacometti’s “The Nose,” a 1965 cast depicting a long nose in a cage.
But despite this, not everyone in the art market is welcoming cryptocurrencies with a positive outlook. Goldsmith assessed the mood during the Paris fair as stable, thoughtful, and undoubtedly free from the turmoil caused by cryptocurrency speculators. The image of crypto as primarily young buyers is also at odds with the lack of diversity in the art auction market itself. There is also the long-standing fact that new entrants are often viewed with suspicion in a market that is largely conservative and closed.
In this tricky market, doubts and concerns about who will use it are just the surface, while concerns about its use are the core issue. The allure of art — in a secretive market that can turn volatile paper profits into transferable, tangible assets — is already enough to make it far more attractive to money launderers, and crypto-nFTs are even more likely to become a new playground for money laundering.
In China, cryptocurrencies are banned “based on numerous anti-money laundering cases,” Angell Xi, a partner at Chinese law firm Jingtian & Gongcheng, wrote in the Art Basel and UBS Art Market Report 2024. In the European Union, the latest anti-money laundering and terrorist financing rules tighten all businesses that provide crypto-asset-related services, including a ban on anonymous payments.
The compliance teams at auction houses are ready and relatively cautious about cryptocurrencies. Outside of dedicated NFT platforms, only a few auction works were eligible until Sotheby’s Saudi sale on February 8, while Christie’s said it has made $150 million in NFT sales to date, including Beeple and his fees.
To date, NFT has been cold and the market has lost most of its heat, but as the market improves, there will be a turnaround in the future. According to the Global Art Market Outlook released by ArtTactic this week, 12% of experts are optimistic about the performance of NFT this year, which is still far below the previous high of 73% in 2023, but twice as much as in 2024.
Meanwhile, Christie's said that the average age of its NFT buyers is 42, while the average age of all auctions is 54. This is in line with Christie's strategy of positioning its business for the younger generation, which is also a key strategy emphasized by Christie's new CEO Bonnie Brennan last week. She said her plan is to "protect cultural heritage while focusing on innovation-attracting new audiences, regions and technologies."
In fact, the art market has been in a clear downturn for the past two years and is in urgent need of fresh blood. According to ArtTactic, the total auction sales of Sotheby's, Christie's and Phillips will fall by 26% in 2024 and 19% in 2023.
Against this backdrop, perhaps any amount of traffic that can be captured is beneficial, so as the cryptocurrency stage lights up again, auction houses that are fighting a desperate battle can only be prepared to join this drama.
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