How to invest in art NFTs?

Not a day goes by without talking about NFTs, these digital identifiers that artists, auction houses, specialized platforms and galleries have taken over. How does it work, and what can we expect from it?

According to a report by Chainalysis, 40.9 billion dollars were spent in 2021 on the purchase of NFTs (Non Fungible Token) or non-fungible (non-interchangeable) tokens, these unique and inviolable digital identifiers which make it possible to authenticate any digital file (image, video, sound, tweet). Non-modifiable, they serve as a certificate of authenticity and constitute digital proof of provenance and ownership of the files with which they are associated. NFTs are stored in a blockchain, a unique, decentralized, transparent and tamper-proof transaction register. But how to invest in an art NFT?

Exorbitant prices

Since the March 2021 sale of an NFT by designer Beeple at Christie’s for $69.3 million, records have multiplied in Anglo-Saxon auction houses. On specialized platforms too: on December 6, Nifty Gateway dispersed a set of 250,000 NFTs by artist Pak for a total of $91.8 million, which would make him the most expensive living artist in the world if it is considered that this collection forms a single work… The enthusiasm is such that the French auction houses launched themselves into the race in March 2021 (Ader, Rossini, Aguttes with the first SMS in the world awarded 132,680 € in the form of NFT on December 21). But French legislation prohibiting them from selling “intangible property”, they only sold NFTs attached to “physical twins”: photographs, videos…

Three billion crypto-art

The market for these art or crypto-art NFTs, defined as ” artistic creations of which at least part of the work exists digitally on a blockchain ”, amounted as of December 31, 2021 to $2,542,028,317, for 77,307 sales to 122,311 buyers, according to the co-founder of the market analysis platform Gauthier Zuppinger. ” These figures are a first estimate regarding the Ethereum blockchain. To this must be added the volume of crypto-art sales from other blockchains and that of the auction houses Sotheby’s ($100M), Christie’s ($150M) and Phillips ($6.19M). “says the specialist.

Collection of NFTs from Yuga Labs, sold for €1.6M by Sotheby’s, on September 9, 2021.

A volatile market

In concrete terms, how does that work ? A collector/investor who wishes to acquire an art NFT must install a crypto wallet (crypto wallet) on his computer or smartphone, convert euros into Ethereum cryptocurrency. Then connect this crypto wallet to a specialized platform like Opensea, before buying a crypto-art that he can resell to other people registered on the platform.

Dream on, NFT created by 25m42, presented by Hofa Gallery, in London.

Dream on, NFT created by 25m42, presented by Hofa Gallery, in London.

The crypto-art market is still very volatile: they are resold on average after 63 days, for an average profit on resale of 7097 dollars in 2021, (figures as of December 9 from Fanny Lakoubay, crypto art and NFTs advisor at LAL Art Advisory, explains: “ Generative series (Profile-pic-projects, collections of digital characters automatically generated by algorithms such as CryptoPunks or Bored Ape Yacht Club) are selling out extremely quickly, being the subject of short-term speculation by a small number of people. ‘actors who for the most part have made their fortunes in crypto-currencies and concentrate the majority of the biggest purchases. This makes the market very unstable and there is more supply than demand. The market is expected to decline and the value of the majority of these projects will be close to zero. On the other hand, the crypto art market whose works are created by digital artists (such as XCOPY, Kevin Abosch, or Pascal Boyart) should stabilize in the long term. Lucky collectors who invested a year ago saw the value of their crypto-art collection increase by 300% at a fixed rate in Ethers. For collectors who wish to invest today, it is in their interest to buy young digital artists, such as these artists in residence at Vertical Crypto Art, but this is still a very young market. “. According to a study by the Nansen analytics platform for the Financial Times, this unregulated space is prone to fraud, scams and market manipulation, not least because the actual identities of buyers and sellers are difficult or even impossible to discover.

Screen Test (Pearl), 2021, auctioned on Foundation © Courtesy of the Artist and Almine Rech

Screen Test (Pearl), 2021, auctioned on Foundation © Courtesy of the Artist and Almine Rech

On the side of the galleries

A few French art galleries have embarked on the adventure in 2021 with average results: Almine Rech on the Nifty Gateway platform, Kamel Mennour on the SuperRare platform. The Art Basel Miami Beach fair tried last December to organize a “curated” exhibition of digital NFTs works, but it is clear that crypto-art escapes the actors of the traditional art market, the exception of an auction house like Sotheby’s which last October launched its own NFT sales platform During the first quarter, two new marketplaces will attempt to attract traditional collectors: Artprice© with (after its competitor Artnet with in December), and CADAF.

Obvious, Bellum Tempus (2021).  Courtesy of the artist

Obvious, Bellum Tempus, 2021, sold for 9.999ETH ($23,757) by Kamel Mennour gallery. Courtesy of the artist

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