NFT values plummet despite 2023 mini-revival

Nina Plowman, luxury industry expert, examines what the future holds with some insight from those working in the NFT and luxury space. 

This update comes from the Luxury Investments report from The Wealth Report Series, giving high-net-worth-individuals a guide to investments of passion.

Late last year, NFT – or non-fungible token transaction volumes hit freefall and public interest declined.

Deal values on OpenSea, the largest marketplace, fell 89% between December 2021 and December 2022, and there were similar downturns among curated platforms over this period.

Auction house Sotheby’s has also reportedly trimmed its team of NFT and metaverse specialists, despite a number of recent high-profile NFT sales.

Despite the wider collapse in crypto assets, the broader art world still expresses confidence in the utility and reach of these digital images.

NFT revival

Transactions hit US$4.7 billion in the first quarter of 2023, compared to just US$1.9 billion in the previous three months, according to sector analyst DappRadar. Though this was still a long way off the US$12.6 billion scored in the first quarter of 2022.

In 2021, the digital artist Beeple made a big impact with his artwork. His piece called Everydays, The First 5000 Days sold for a record-breaking US$69 million at an auction. He also sold another artwork called Human One for US$28 million later in the year. These sales shocked the art world.

Beeple's Everydays, The First 5000 Days sold for record-breaking US$69 million at auction

But NFTs produced by well-regarded digital and generative artists are still selling for decent sums of money.

In New York this May, for example, Christie’s 3.0 – the auction house’s digital arm – sold Jack Butcher: Checks Elements – This artwork may or may not be notable for 50.1 ether, the equivalent of US$93,000.

A month later at a sale raising funds for the Multidisciplinary Association for Psychedelic Studies, works by leading digital artists fetched a total of US$372,570.

The highest-selling item at the auction was Self-Discovery by DeeKay, which fetched nearly 49 ether.

Provenance and a shade of notoriety also help. Sotheby’s realised almost US$11 million – double the high estimate – in June when it sold off 40 digital artworks that belonged to the bankrupt crypto business Three Arrows Capital. Generative artist Dmitri Cherniak’s Ringers #879 (The Goose) went for US$6.2 million.

Dmitri Cherniak’s abstract NFT sold for US$6.2m

Changing art

According to Claudia Schürch, Christie’s Senior Specialist in Post War & Contemporary Art, the level of investment in NFT artworks and the attention the auction house is paying to digital creators stands to reason when considering the changing face of art history. “Art is always revising itself. For digital art and for every single category, there’s always a newly discovered artist or someone we want to include,” she says.

Claudia is a proponent of the notion of the eclectic collector. “You can like contemporary art and Old Masters, and you can like the Impressionists and digital art.” She believes that NFTs have opened up the art world to a new collector as an access point. “Once they are in, they will then transition to new and different art choices.”

But where are we now when it comes to broader perceptions of art on the blockchain? It seems that the NFT marketplace has moved beyond its initial ‘gold rush’ stage, and collectively the art world is reaching a more measured understanding of where it stands.

NFT functionality improving

Bernadine Bröcker Wieder, CEO at Arcual, the art market’s first blockchain platform, is breaking through linguistic barriers and focusing on functional benefits in real terms.

“It is about the underlying functionality. The art market has been reluctant to use technology until recent years, often due to concerns about the custodians of secure information; who they are, where data is being stored, and how it can be trusted. Blockchain allows us to create trusted spaces for information to be stored that weren’t there before,” says Bernadine.

The future of NFTs

Wider adoption is an inevitable next step once regulation becomes more sophisticated and both creators and consumers are better protected.

The market is working through challenges with the technology itself and reflecting on how NFTs and the broader Web3 can solve many of the issues in the art and luxury market relating to authentication, provenance and security of ownership, as well as potentially reducing transactional costs. Anders goes on to observe that the values have changed but the appetite still exists:

“Since the NFT market peak of 2021, there has been an adjustment and a correction in the market. We have seen Bored Ape Yacht Club, a popular series of NFTs which were, and still are, incredibly valuable, reach a floor price of around US$260,000 a year ago. Today this is about US$80,000.”

The key numbers

Art Basel UBS Art Market Report 2022 gives a glimpse into how the market may perform in the future. 

• Art and collectibles NFT sales increased over a hundredfold from US$4.6 billion in 2019 to US$11.1 billion 2021
• In 2021 74% of high-net-worth collectors had purchased art-based NFTs
• Almost 90% said they were interested in purchasing NFT artworks in the future
• There were 46% of dealers reported to have no interest acquiring or selling NFTs with 19% interested in doing so in one or two years

A changing marketplace

At the start of 2023, Centre Pompidou became the first museum for modern and contemporary art to invest in the art form of NFTs, acquiring 18 works by 13 different artists, both French and international.

“Not only is this a step forward in the medium being accepted into the art world, but also recognition of the creative appropriation of this new technology by the artists,” says Alex Estorick, journalist and media theorist.

“NFTs have provided a vehicle for diversifying the marketplace and have given a platform to new mediums that people previously ignored, including artists, illustrators and creators. “The technology has the ability to connect artist and brands with new audiences and while there is uncertainty about the value of NFTs, the development of digital art will be determined by the platforms that support them in the future.”

We can also safely anticipate that the role of NFTs will continue to change. Luxury brands and consumers are seeing how this technology can be applied to our everyday lives and how it can be complementary to traditional collecting modes.

Tiffany & Co, for example, is no longer talking about NFTs, but focusing on how the technology can create valuable assets and an enriched user experience of collecting.

It is true to say that the established art world has reinforced the blockchain with a blueprint, but other asset classes and luxury sectors are catching up fast. The fashion world is recognising that blockchain technology provides an opportunity to connect with the digitally native luxury consumer of the future.

Evolving technology

As Alex points out: “75% of children in the US between the age of nine and 12 have a Fortnite or ROBLOX account. They have the option to purchase 'skins' (virtual items to personalise their game) from brands like Balenciaga and Chanel, among others. What these luxury brands are doing is putting a down payment on their mind space.”

“This move towards wider adoption is all about accessibility,” adds Sian Rodway, COO at MDRx. “In order to see adoption of this space, brands have to unlock wider and new audiences by making the way that we collect and own digital assets straight forward to understand and adopt… It should be described in terms of the user experience,” she explains.

High-value luxury good purchases through social media would have been unthinkable just a few years ago, yet today these transactions can be a regular feature of our lives. In a similar way, the technology of the blockchain, NFTs, and crypto will ultimately become tech-vocab of the past as will our preoccupation with how these system works. It will become part of our every day.

In Bernadine’s words, “the blockchain movement was initially focused on creating or proving the value of digital assets by adding them to the blockchain. We’re now at a point where we’re seeing how the technology can be used to preserve and enhance the value of many more asset classes and processes.”

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