The NFT Craze Fades, Top Auction Houses’ Attempts at Crypto Assets

As the price of Bitcoin hits a new high, Ethereum is also approaching its peak in 2021, and those in the art world who once had high hopes for Crypto Assets are once again eager to jump in. Early signs indicate that the pioneering reformers in the art industry are indeed seizing this trend.

A few weeks after U.S. President Trump was re-elected, the prices of Crypto Assets surged rapidly, and Trump showed strong support for decentralized digital assets. Prior to this, the founder of a certain crypto platform purchased Maurizio Cattelan’s “Comedian” (2019) for a high price of $6.2 million, which was essentially just a banana taped to the wall. This transaction was paid for with encryption, attracting widespread attention.

Against this backdrop, a well-known auction house will hold its first physical auction in Saudi Arabia next month that accepts ETH or BTC payments, marking the first time a traditional auction house supports Crypto Assets payments throughout the live auction. The auction house stated that this change could attract a new group of buyers in regions where digital art and Crypto Assets activities are vibrant. This auction features a total of 119 lots, including contemporary art from the West and Saudi Arabia, luxury items, and a jersey from football star Cristiano Ronaldo, as well as a generative “AI data painting” created by Refik Anadol. His work “Machine Hallucinations - Space | Chapter 2: Mars” (2021) uses space telescope data to create surreal organic landscapes, with an estimated value between $800,000 and $1.2 million.

Before the outbreak of the COVID-19 pandemic, the art market struggled to attract people from the tech industry due to differences in style. The rise of NFTs has indeed brought a new wave of crypto assets millionaires. NFT is a unique digital asset that connects art with blockchain, often used for creating geometric abstract paintings and cartoon comics.

In 2021, several well-known auction houses began accepting Crypto Assets for the purchase of certain physical artworks. Previously, an auction house sold Beeple’s “Everydays: the First 5000 Days,” which is an NFT that stitches together 5000 digital images, ultimately fetching a high price of $69 million. The buyer was the founder of a Crypto Assets investment fund.

Since then, eligible physical artworks have begun to align with technological tastes. For example, a bright yellow painting created by Keith Haring in 1984, depicting a group of people mesmerized by computers, was sold for £4.3 million. Currently, major auction houses have established dedicated NFT and digital art platforms, allowing sellers and buyers to trade using Crypto Assets.

For the art market, practitioners hope to open channels for new buyers to enter the high-priced art sector through NFTs and related alternative coins. A well-known investor has completed this journey, from purchasing the digital artist’s screensaver-style “Cube” NFT work, to collecting KAWS’s paintings, and then acquiring Alberto Giacometti’s “Nose” sculpture for $78 million.

However, not everyone welcomes the impact of Crypto Assets. Some art advisors believe that the market atmosphere has stabilized, moving away from the turmoil caused by Crypto Assets speculators. The image of Crypto Assets primarily targeting young buyers is at odds with the lack of diversity in the art auction market itself. Additionally, the art market has long been cautious towards newcomers, and this market is largely characterized by conservatism and closeness.

In addition to concerns about the user group, the more fundamental issue is the concern about the purpose. Art has become attractive in a hidden market that can transform unstable book profits into transferable tangible assets, which has increased its appeal to money launderers, and cryptocurrency-based NFTs may become a new breeding ground for money laundering.

In China, Crypto Assets are banned due to several anti-money laundering cases. The EU’s latest anti-money laundering and counter-terrorism financing rules have tightened regulations for all businesses providing services related to Crypto Assets, including a ban on anonymous payments.

The compliance team of the auction house is ready and has a relatively cautious attitude towards Crypto Assets. Apart from specialized NFT platforms, only a few auction pieces qualify. One auction house stated that its NFT sales have reached $150 million so far.

Despite the current cooling of the NFT market, which has lost most of its heat, there may be a turnaround in the future as the market improves. According to the latest “Global Art Market Outlook” released by ArtTactic, 12% of experts are optimistic about the performance of NFTs this year, although this is far lower than the 73% high in 2023, it is double that of 2024.

At the same time, a certain auction house stated that the average age of its NFT buyers is 42 years old, while the average age of all auction participants is 54 years old. This aligns with the auction house’s strategy of positioning its business towards the younger generation, and is also a key strategy emphasized by its new CEO, Bonnie Brennan, last week, who stated that she plans to “protect cultural heritage while focusing on innovation - attracting new audiences, regions, and technologies.”

In fact, the art market has been in a明显低迷状态 for the past two years, urgently needing fresh blood. According to ArtTactic, the total auction volume of several well-known auction houses has decreased by 26% in 2024 and by 19% in 2023.

In this context, any opportunity that could bring traffic is worth seizing. Therefore, as the Crypto Assets market heats up again, the auction house, which has no way out, can only prepare itself to face this new challenge.