Art reimagined: NFTs are changing the collectibles market
With professionals stepping into the NFT space, the market is set to mature, making digital art a part of traditional collectibles.
Art has been serving as the ultimate source of inspiration to many people throughout all of history. In the era of cryptocurrencies and the digitized world, trends change faster than ever. For years, numerous artists have tried stepping into rapidly advancing playgrounds and grabbing their slice of pie, but now their time has truly come.
The NFT fever has quickly taken over the industry, turning digital artists and popular meme creators into rich celebrities. It’s hard to estimate when this euphoria will run out of steam, but before the hype train stops, we’ll surely see more market records and thrilling experiments in this area.
Related: NFT trading cards: A new way to own collectibles or an asset bubble?
From a few pennies to a fortune
The market cap of nonfungible tokens, or NFTs, shows fast-moving developments, growing nearly tenfold between 2018 and 2020. The path from niche forums to the oldest auction houses was incredibly fast. Christie’s has recognized the trend in advance, launching one successful NFT sale after another. Different artworks and collectibles have born six-digit price tags — and more. The latest groundbreaking world record led to over $69 million being paid for a JPEG file by the artist Mike Winkelmann, also known as Beeple. Could this have been predicted a few decades ago?
The globally recognized auction house has plans to put nine rare CryptoPunks NTFs up for auction for an upcoming sale on May 11. “For the first time, 5,184 pixels’ worth of a revolutionary NFT project will go up for auction at a traditional auction house,” the auction house exclaimed. The estimated total sale price is between $7 million and $9 million, but it may well turn out to be much higher, since one of these tokens already sold for $7.5 million in March.
CryptoPunks is a prime example of the current boom in the NFT market. The project was initiated by Matt Hall and John Watkinson, founders of New York-based software company Larva Labs, when they created 10,000 images of people in 24×24 pixels. It’s hard to believe that the project’s founders distributed these NFTs to members of the crypto community just for free. Half a year later, the cost has surged to several thousand dollars, and today, these collectibles are already being sold for millions. What causes people to buy unconventional pixel digital art for the price of a garage full of luxury cars? The hype is caused by the role of cryptocurrencies rising globally and the fact that these limited editions still represent some of the first collectibles on the crypto market.
Tatiana Stiskina, an art historian and art adviser, explained the motives:
“I have decided to buy a CryptoPunk even before Christie’s announced their sale May 11. So my husband and I bought it on the day when Christie’s announced the sale. CryptoPunks is an even deeper symbol not only of cryptoart, but of the tech industry, as they are generated using an algorithm. It is the algorithms that are worshiped by the people who gave us everything related to Hi-tech and DeFi.”
Unraveling the story behind NFT’s popularity
What makes NFT items so desirable and special? Blockchain is the groundbreaking technology that changes almost everything it touches. The record of ownership can’t be faked, and NFTs can’t be copied and pasted. Empowered by distributed ledger technology, such tokens are nonreplicable and cannot be substituted, having only a single owner at a time. Due to their interchangeable features and fungibility, despite being called “nonfungible,” NFTs are liquid and can be purchased or sold on Ethereum-based markets.
Related: The chicken or the egg: Why NFTs could be fungible after all
CryptoPunks are some of the first NFTs, launched back in 2017 on the Ethereum blockchain. These tokens use the ERC-721 protocol standard, which means they are unique and cannot be replaced by another, hence their nonfungible nature.
Why are some tokens worth pennies while some increase in value to tens of thousands of dollars, and others yet are worth millions? The price is valued based on rarity analyses of specific attributes that the crypto art and community respect. However, although CryptoPunks have been pioneering the space, there are other examples that can eclipse their success. Like every additional, highly lucrative opportunity, this field has become overcrowded with the sharks that want to capitalize on the moment by defrauding consumers and collectors. When you keep in mind that the total value of NFT transactions quadrupled to $250 million last year, this trend doesn’t surprise anyone.
Related: NFTs and US taxes: What you should know
A glimpse into the future
There are no estimates on how long the anchor of NFTs will continue to appeal to wealthy investors. Some suggest that the bubble will burst faster than the initial coin offering fever ended. Right now, perhaps a fresh outlook combined with decent taste can make a difference and change things. A new ship must arrive at the NFT’s blockchain harbor that could promise such changes.
Last week, the crypto community went crazy about a new NFT collectible project — The Bored Ape Yacht Club, a collection of 10,000 Bored Ape NFTs living on the Ethereum blockchain — of unique digital collectibles, which sold out on the primary market. This is an exciting project that is trying to include gamification and community elements, and it will be interesting to see what comes next.
Ksoids project — which debuted on April 22 as an NFT project — skyrocketed to the first position in the charts on OpenSea just after a few days. Over 900 of the total 1,000 sold out, so some are still available to buy at auction. Ksoids are algorithmically unique creatures, whose breath of fresh air and creativity in its finest did not go unnoticed by digital art enthusiasts, collectors, fans and investors, declaring it to be a true indie project. Ksoids are the first generative art of 3D characters that not only create a world of their own but also help protect ours. 20% of each sale will be donated to the Orangutan Outreach, a nonprofit organization dedicated to protecting orangutans in their native habitat.
The latest NFT collection from Larva Labs was the talk of the crypto community in the last few days — the public sale being over within hours. The Meebits, 20,000 unique 3D voxel characters, are created by a custom generative algorithm registered on the Ethereum blockchain. According to data from Dune Analytics, Larva Labs made a staggering $72,976,613 from the public sale.
Related: What you should know before buying or selling an NFT in the US
Behind the boom for digital collectibles
In a highly speculative market, every new record becomes less impressive than the previous one. There will always be people willing to pay astonishing amounts of money for experimental ideas just for curiosity or to stand out of the crowd.
Some high-profile investors regard NFTs as a way to diversify their crypto portfolios and create new kinds of elite clubs, and most of the new market participants hope that digital art will cost a fortune sometime in the future. The only obvious thing is for the market to further mature and progress, and for professionals to step in and set benchmark quality examples.
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