New gold rush: the rise of NFTs in crypto art
09 September 2021
A jpeg selling for the same price as an original Van Gogh? A cat meme worth more than a Boeing? Welcome to the Wild West of NFTs.
17 min read
Receive Focus insights straight to your inbox
Artists, dealers, museums, auction houses and art fairs were all forced to rethink how to communicate with their audiences during the pandemic. The results were uneven, but also led to new models in viewing and acquiring art.
If you wanted to distill the impact of Covid-19 on the art industry, you can narrow it down to a shift from moving artworks to people rather than people to artworks. In this way the pandemic caused traditional models for viewing and/or aquiring art to be upturned. As such instead of people visiting galleries, art fairs, museums, live auctions or festivals to see art, the art had to be ‘brought’ to them via digital tools.
This naturally translated into a virtual tsunami of online exhibitions, art fairs, auctions, Zoom panel-discussions, interactive online catalogues and OVRs (online viewing rooms), all functioning as the virtual channel to art and art-related events.
Bridget Riley's (Untitled Curve) was one of the highlights of Sotheby's livestreamed Contemporary Art Evening Auction that took place on 21st October 2020. (Photo by Tristan Fewings/Getty Images for Sotheby's). Sotheby's innovative new auction format – dubbed the Auction of the Future – won a 2021 Webby. Their state-of-the-art auctions are livestreamed across three continents in high-definition, with near-zero latency streaming for real-time bidding.
Most agreed that the art world had been in need of a digital makeover, given how e-commerce has infiltrated and, indeed, reconfigured so many other cultural spheres – from the book trade to the music industry.
No doubt the art industry had been slow to embrace digital tools due to the fact that live events, such as art fairs delivered on two characteristics that are thought to keep the art world turning; an artworks ‘power’ or impact, whether visual, tactile or metaphysical can only really be absorbed in person, and the status attached to socialising at VIP art events.
As such, while the digitisation of art viewing and trading might have appeared like the natural solution and part of its evolution, it had a seismic impact on the global art market. In fact, the Covid-19 pandemic is described as generating “the biggest recession in the art market since the 2009 global financial crisis,” according to The Art Market 2021 by Art Basel and UBS.
This annual report, which measures shifts in the global art market, found that sales of art and antiques reached an estimated $50.1 billion in 2020, 22% less than its turnover in 2019. It is, however, worth bearing in mind that values were down by 27% since 2018. In other words, art sales – across different channels have been on the decline. The losses relating to Covid-19 should have been more – given they caused such a radical disruption to the art market.
In contrast, online art and antique sales totalled $12.4 billion in 2020 – roughly double 2019's total of $6 billion, according to Statista.
Without a doubt digital tools and inventiveness on the part of artists, dealers, museums, auctioneers and art fair organisers mitigated some of the losses, though with varying degrees of success.
Queen Elizabeth II, from: Reigning Queens by Andy Warhol is displayed during preparations ahead of online sales at Christies Auction House on March 26, 2021 in London, England. (Photo by Ian Gavan/Getty Images)
Online art fairs appeared to offer an alternative to live events. However, the sales they generated was much lower than expected.
While in 2019, art fair sales accounted for 43% of all sales made by art dealers, by 2020 this was reduced to 13% of their income, according to the UBS report. This might not be surprising given that of the 365 global art fairs planned for 2020, 61% were cancelled.
Locally, while the Investec Cape Town Art Fair took place in February 2020, almost all other art fairs held a virtual event that year – Art Joburg, The Turbine Art Fair and Latitudes opted out of the art fair game altogether becoming a permanent online platform.
In September 2021, the Investec Cape Town Art Fair hosted its very first digital event and online viewing rooms. "Sales were decent and galleries particularly encouraged by the reach and marketing opportunity in September in the lead up to the hybrid edition taking place this February 2022. Although we hope to always be able to host the fair physically, there is so much opportunity online and we have only just touched the surface," said Sophie Lalonde, Head of VIP and Partnerships for the Investec Cape Town Art Fair.
This year, participating galleries will show their work physically at the Fair as well as on the online platform: digital.investeccapetownartfair.co.za, going live the same dates as the the physical edition, 18-20 February 2022.
Cape Town-based gallery Whatiftheworld didn’t enjoy much success with online art fairs, according to its director Ashleigh McLean. However, the loss of the sales was counteracted by the costs of participating in fairs. “Not having the overheads of the fairs saved us,” says McLean.
This experience seems to have been echoed in the global art market with the costs of participating in art fairs accounting for the highest percentage of overheads for galleries – more than payroll or rent. In 2020 they had been on average reduced to 16%, according to the UBS Global report.
Participating in online art fairs is less about sales and more to do with having as much visibility as possible, opines Charl Bezuidenhout of Cape Town-based Worldart gallery, which have participated in as many local online fairs as possible this year.
Online art fairs might have seen less activity, but the production of art appears to have ramped up - particularly during the initial ‘go-slow’ that the first round of lockdowns generated in South Africa.
For three Cape Town-based artists, Penny Siopis, Gerhard Marx and Chris Soal, the social isolation and absence of art fairs and other live events afforded them uninterrupted to time to focus on their art.
Siopis wasn’t able to attend a residency in California or the opening of her solo exhibition in October 2020 at Stevenson in Amsterdam, but the concentrated time at home aligned with a need “to work on a project that required an intimate integration of my film work and my painting process,” she says.
Marx, whose wife, Maja, is also an artist, says they relished the chance “to work with unaffected focus and intensity, using the studio also as a space of contemplation and solace in the initial uncertainty of the lockdown period”. He staged two exhibitions at Goodman gallery in Joburg (August 2020) and London in June this year.
For Soal, a young artist renowned for his intricate sculptures made from toothpicks, “The ‘quiet’ of 2020, specifically regarding the postponement of deadlines, really allowed me to produce in a protected space, away from external pressures. This resulted in being able to put on three solo shows in the first half of 2021 alone, something I would never have been able to do had I not had the time to prepare uninterrupted.”
All three artists opened exhibitions over this last year under varying social distancing restrictions, yet, remarkably, they say this had little impact on the sales or reception of their works.
“Most buyers are international and select off pdf catalogues without even seeing the works in person - either being existing collectors or having perhaps seen my work in other contexts, or just being first-time buyers. Not sure that the absence of the pandemic would have changed that,” says Soal, who staged As Below, so Above, at the Whatifthworld gallery in Cape Town in January this year.
The digital shift made Siopis keenly aware that the materiality of her painting didn’t translate well in a digital form: “You can't apprehend the material surface, process, scale and so on.” However, counteracting this, the numerous online talks and other novel digital programmes she participated in – such as a filmed visit to her studio and an insert for Art Basel’s Pioneers – generated interest in a wider audience beyond an art fair or gallery show.
The absence of art fairs as a marketing and sales tool forced galleries out of their comfort zones and prompted new initiatives and platforms, suggests Marx. Artists too were under pressure to market their work more online, through social media or their websites. Many artists without gallery representation blossomed online, generating sales on Instagram.
“It was my sense that agency shifted away from the middlemen and gatekeepers, and towards artists as creators and drivers of content,” says Marx.
The sales of art may have contracted during the pandemic, but the value of art appears to have been stable. In the first seven months of 2020, the Masterworks.io price-weighted All Art Index — which tracks the art market as a whole — was up 5.5%. Meanwhile, its Contemporary Art Index and Impressionist Index gained 6.7% and 2.0%, respectively, according to a 2020 report on the art market published by Citi.
Two new reports released by Corrigall & Co, Modern and Contemporary African Art Auctions 2020/2021, shows that the average value of modern and contemporary art produced by Africans has increased from 2020 to 2021. This is based on the analysis of 45 auctions dedicated to art produced on the African continent. The steady rise in value of African art is partly due to the fact that it has been undervalued – prices haven’t been bloated – and interest in collecting art by Africans has increased on the global art market.
“It's moving from a market where there's always been significant collectors, especially in South Africa, that's a very well-developed market, to one where we have been seeing more speculators. Many more people want an African artist in their collection,” says Hannah O’Leary, director African Modern and Contemporary Art at Sotheby’s, London.
Unlike the financial crisis in 2008, this global crisis saw the number of billionaires rise by 7% and their wealth grew 32% over the year, according to the Credit Suisse Global Wealth report 2021.
While not all billionaires buy art, it is understood that the vicissitudes of high-net worth (HNW) individuals is closely tied to that of the health of the global art market. Certainly, this HNW group are keeping the high-end of the art market going – 66% of collectors defined as HNW reported that “the pandemic had increased their interest in collecting,” according to the USB 2021 report.
Of that group, says UBS, the millennial HNW collectors were found to be the highest spenders in 2020, having spent over $1 million (versus 17% of Boomers).
This ties in with the perception that the digital shift in art trading has been more quickly adopted by a tech-savvy younger generation, who have less hang-ups with online shopping.
Latitudes have found that their platform has attracted a lot of younger new collectors. “They tend to gravitate towards the lower ticket prices and many of them appear to be first-time buyers. On an online platform they can look at art in a less intimidating setting and browse in their own time,” observed Roberta Coci, co-director of Latitudes Online.
Generation X’ers have been responsible for most of the online sales Whatiftheworld have made through Artsy – a third-party platform - according to McLean.
Of all the art sectors it is the auction one that has made the most successful transition to online art dealing – and it is not limited to a certain generation of art buyers. It was found that the most common channel for purchasing art online was an online auction, according to the UBS report.
The large international auction houses, and some of local ones (Strauss & Co and Aspire Art Auctions) had been conducting online sales prior to Covid-19 so they were well positioned to pivot online. However, these sales had in the past been limited to lower valued works.
The ceiling for online auctions was raised in 2020 with several works selling for over $1 million, according to the UBS report.
In South Africa, large works tended to find buyers on hybrid sales – that is where the auction was streamed live. At Strauss & Co’s first big hybrid sale in May 2020, two high-priced works by Irma Stern - Still Life with Lilies (1947) and Zanzibar Arab (1939) - went for over R10-million.
Much of the success of online art auctions has related to the ways in which the houses have relayed information about the artworks. Online talk programmes and panel discussions have been attached to most sales and have attracted more audiences than normally would have been the case, says Marelize Van Zyl, senior art specialist at Aspire Art Auctions. “We have made many videos of the artworks and do closeups so you can see and experience the works. We have all become innovative about getting the information out.”
The resilience of the secondary market for art and the ability of the auction houses to harness it, has seen some of the traditional boundaries between it and what is termed the primary art market (the first sale of art by galleries or dealers) fall away. The 1;54 Contemporary African Art Fair partnered with Christie’s auction house for fairs they held in London in 2020 and in Paris in 2021 and will resume the relationship for the London fair in October last year.
Pictured: A magnifying glass hovers over Beeple's Everydays (credit: Alamy) that was sold by Christie's for a whopping $69 million in March 2021. Christie’s was the first major auction house to offer a purely digital work with a unique non-fungible token (NFT) — effectively an online certificate of authenticity — and to accept cryptocurrency in addition to standard forms of payment for the lot.
Those interested in the recovery of the global art market, have their eyes trained on the US not the UK. Not only does the USB 2021 Art Report once again confirm that the largest concentration of collectors is based there, but as one of the strongest performing markets of the past decade, it helped the art market’s recovery after the last big financial crisis in 2008.
The Joe Biden – Kamala Harris leadership in that country has boded well for the art market. Not only are the duo known to be supporters of the arts, but their leadership has brought more stability to the art market – political uncertainties had seen a drop in high-end sales in 2016, according to the USB report.
Covid-relief funding and other schemes which have led to the US recovering faster than other countries has seen a boost in art sales. A number of Cape Town galleries have reported good online sales from US-based collectors.
“We are going to do the Art Chicago (art fair) and Untitled Miami. Traditionally we looked to Europe, but the US seems to have the fastest-recovering economy,” said McLean.
Mary Corrigall is an art journalist, advisor, consultant and author of the South African Art Market: Patterns & Pricing (2019).