The NFT craze subsides, top auction houses' attempts with Crypto Assets

As the price of Bitcoin continues to reach new highs, Ethereum is also nearing its peak from 2021, and those in the art industry who previously had high hopes for Crypto Assets are once again eager to try.

Early signs show that the pioneering change-makers in the art industry have indeed seized on this trend. A few weeks after the U.S. presidential election, Crypto Assets surged rapidly, and the new president demonstrated a strong commitment to supporting decentralized digital assets. Prior to this, the founder of a certain crypto platform purchased Maurizio Cattelan's "Comedian" (2019) at a New York auction for $6.2 million—essentially just a banana taped to the wall. This exorbitant auction price catapulted it to the headlines of most media outlets, and the buyer paid for it using Crypto Assets.

In this context, next month, an auction house will accept ETH or BTC payments at its first auction in Saudi Arabia, marking the first time a traditional auction house supports Crypto Assets payments for an entire live auction of physical items. The auction house stated that this change could attract an additional group of buyers in regions where digital art and Crypto Assets activities are very active. The auction will feature a total of 119 lots, including modern and contemporary artworks from the West and Saudi Arabia, luxury goods, and a jersey worn by football player Cristiano Ronaldo, as well as generative "AI data paintings" created by leading practitioner Refik Anadol. His large-scale work "Machine Hallucinations - Space | Chapter Two: Mars" (2021) uses data from space telescopes to create surreal organic landscapes, with an estimated value between $800,000 and $1.2 million.

In fact, before the outbreak of the COVID-19 pandemic, the art market had difficulty attracting people from the tech industry due to its inherent stylistic conflicts. The rise of NFTs has indeed brought a number of new crypto asset millionaires and billionaires. NFTs are unique digital assets that connect art to blockchain, and can be used to create geometric abstract paintings and cartoon comics.

In 2021, several auction houses began accepting Crypto Assets to purchase certain physical artworks. Previously, an auction house sold Beeple's "Everydays: the First 5000 Days," which is an NFT that combines 5000 digital images, many of which are satirical, including a giant naked politician sitting on the Capitol. Its final buyer was the founder of a Crypto Assets investment fund, who purchased the artwork for an astonishing $69 million.

Since then, eligible physical works have begun to lean towards technological aesthetics, including a bright yellow painting created by Keith Haring in 1984, depicting a crowd mesmerized by computers. This painting was sold at an auction house for £4.3 million, although the auction house was unwilling to confirm whether it accepted a proposal to pay with Crypto Assets. The auction house accepts other currencies on the condition that the seller is willing to accept Crypto Assets, while bidding is still conducted in the local fiat currency, as are the auction house's fees; the auction house itself does not hold Crypto Assets. Now, every well-known auction house has its own dedicated NFT and digital art platform, where sellers and buyers can use Crypto Assets.

For the art market, practitioners hope to use NFTs and their related alternative coins to broaden the channels for new buyers to enter the typically higher-priced art domain. A certain crypto entrepreneur personally completed this journey—spending over 6.2 million dollars in the process. At the beginning of 2021, he purchased the digital artist Murat Pak's screensaver-style "Cube" NFT works, which were sold through a certain auction house on a specialized platform, each priced at 1,500 dollars.

A few months later, according to the entrepreneur's social media, he purchased "Untitled (Kimpston)" (2001) for HKD 2.5 million (approximately USD 300,000), a painting created by the hot artist KAWS, featuring the artist's cartoon character with X-shaped eyes, sealed in bubble packaging. Just five months later, he ventured into heavyweight modern art by buying Alberto Giacometti's "Nose" sculpture for USD 78 million. This is a sculptural work cast in 1965, depicting a long-nosed head locked in a cage.

However, despite this, not everyone in the art market welcomes the impact of Crypto Assets with optimism. An art consultant assessed the atmosphere during the Paris fair, believing that the market ambiance is stable and thoughtful, undoubtedly shaking off the turbulence caused by Crypto Assets speculators. The reason for this is that the image of Crypto Assets primarily being bought by young buyers is at odds with the art auction market's own lack of diversity. There is also a long-standing objective fact that newcomers are often viewed with suspicion, as the art market is largely characterized by conservatism and closed-mindedness.

In this tricky market, the doubts and concerns of the user base are merely surface reasons; the concerns about the use case are the core issue. The appeal of artworks — in a secret market where unstable paper profits can be converted into transferable tangible assets — has already significantly increased its allure to money launderers, and NFT with Crypto Assets is more likely to become a new playground for money laundering.

In China, Crypto Assets are banned, "the reasons are based on numerous anti-money laundering cases," wrote Angell Xi, a partner at the Chinese law firm Jingtian & Gongcheng, in the "2024 Basel Art Fair and UBS Art Market Report." In the European Union, the latest anti-money laundering and terrorist financing rules have tightened 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. Outside of specialized NFT platforms, only a few auction items qualify until a certain auction house's auction in Saudi Arabia on February 8, while another auction house stated that its NFT sales have reached $150 million to date, including Beeple and its fees.

As of now, the NFT market has cooled down, and it has lost a significant amount of its heat. However, as the market improves, it will also usher in a turning point. According to the "Global Art Market Outlook" released this week by ArtTactic, 12% of experts are optimistic about the performance of NFTs this year. This percentage is still far lower than the previous high of 73% in 2023, but it is twice that of 2024.

At the same time, an auction house stated that the average age of its NFT buyers is 42 years, while the average age of all bidders is 54 years. This aligns with the auction house's strategy of targeting the younger generation, and it was a key strategy emphasized by its new CEO, Bonnie Brennan, last week, who stated that her plan is to "preserve 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 over the past two years, urgently needing the introduction of fresh blood. According to ArtTactic, the total auction volume of several major auction houses decreased by 26% in 2024, and by 19% in 2023.

In this context, perhaps any bit of traffic that can be captured is beneficial. Therefore, as the Crypto Assets stage lights up again, the auction houses that are fighting for survival can only prepare to join this grand performance.