Felix Xu started his NFT art collection by purchasing a Chromie Squiggle, generated by an algorithm. Today, Xu, a 29-year-old Chinese tech executive, has more than 3,000 blockchain-based collectables. But there is a hole burning in his crypto wallet that he would like to fill with real paintings. His budget stretches toward $500,000 and he is already on the waitlist for in-demand artists who use paint and moving brushes like Zhang Zipiao.
So in December, Xu, a founder and CEO of startups Arpa and Bella Protocol, ventured through the gallery booths of Art Basel Miami Beach, where dealers from David Zwirner and Pace Gallery tried bending his ear toward the contemporary art market. He was looking for an education; they were looking for a sale.
“I was really amazed by all the sculptures and paintings,” Xu said in an interview, crediting the fair with expanding his interest from blue-chip modernists like Picasso toward living artists such as Nigel Cooke and Jessie Makinson.
Xu is among the increasing number of non-fungible token collectors looking to invest their cryptocurrency in something tangible: a traditional art collection, starting with the painting he bought in January by Renqian Yang, a Chinese artist living in New York.
Critics have scoffed that a marriage between NFTs and the art world is impossible. But catering to the tastes of the crypto nouveau riche has become the frantic obsession of the commercial art world, which is reshaping itself around these new collectors nearly a year after artists like Beeple and Pak sold NFTs for tens of millions of dollars, inspiring the typically technophobic art industry to head into the metaverse.
After all, among the NFT collectors roaming Miami Art Week was an anonymous crypto collector, known as Pete D, who bought a 1950 tapestry by Le Corbusier from Boccara Art before posting on his blog about “the weird and wonderful world of top-tier physical art collecting.” And Rahilla Zafar, based in Austin, made her first purchase from the fairs, a painting by Matthew F Fisher offered by OCHI Gallery.
“The gallerist said he was an amazing artist whose pieces are going up in value,” said Zafar, a documentarian and an adviser for blockchain startups. To her, pricey NFT collectables BoredApes and CryptoPunks — where proof of ownership is stored on the Ethereum blockchain — she has since added two dozen works for her walls.
Even as they court collectors from the metaverse, art galleries are going further, embracing the technology that threatens their business model. Many have invested in digital platforms. Industry experts say it is an opportunity for dealers to limit incentives for their artists to cut them out as the middlemen and independently sell their work.
“The art market is always looking for a new territory to expand into, and the NFT world is like the perfect gateway drug,” said Natasha Degen, chair of art market studies at the Fashion Institute of Technology. “Anyone involved in a market like NFTs that is so volatile and speculative would have an easy time transitioning to the art world where those same dynamics occur.”
Sotheby’s started selling NFTs only last year, but the digital assets generated $100 million in sales, the company said, with 78 per cent of NFT bidders being new clients — and more than half of those bidders under 40. “In the last three or four months, we have seen a greater interest in physical art from NFT collectors,” said Charles Stewart, the auction house’s CEO, explaining that new collectors craved the context for their digital creations that art history could offer.
Its competitor, Christie’s, says it brought in $150 million in NFT sales. Both auction houses are doubling down on the crypto business. Sotheby’s, for example, has joined a $20 million investment in the NFT marketplace developer Mojito, which helped the auction house build its own virtual gallery last year.
An early convert from the NFT community, Justin Sun, the tech entrepreneur and founder of the cryptocurrency platform TRON, bought a $20 million Picasso at a Christie’s auction last year. In November, he continued his buying spree at Sotheby’s, with a $78.4 million purchase of a 1947 Giacometti sculpture, 'Le Nez.'
It was Sun’s art adviser, Sydney Xiong, who handled the transaction by phone. Xiong has helped the crypto billionaire assemble a collection of traditional and NFT artworks for his APENFT Foundation, a platform she has said will bridge the gap between the art world and metaverse.
“Before the auction, he didn’t know anything about Giacometti,” explained Xiong, who said the pair discussed the artist for three hours before placing a bid. “I tried to educate him and let him know how important the lot was and why we should have it.”
In November, APENFT Foundation started a $100 million fund to cultivate the talents of digital artists. More than 30 people now work for the foundation, which has plans to exhibit its physical and digital collection in Shanghai. Xiong said that the foundation is now considering minting Giacometti and Picasso NFTs on the TRON blockchain, a cryptocurrency platform also created by Sun.
In December, Sun said that he would retire from TRON to promote blockchain and crypto use in Latin America.
Many artists have moved into the metaverse with projects that straddle digital and physical elements. Often, the admitted goal is to convert the crypto rich into art connoisseurs. Forsaking his furniture design and museum exhibitions, artist Tom Sachs has a pet art project called 'Rocket Factory' where users can purchase three separate stages of a digital NFT rocket ship; once the ship parts are combined, the artist launches a physical replica into the sky. After it’s recovered, the replica is shipped to its owner in a custom display box and the online version is updated with metadata from the launch.
Sachs described the project as turning his studio into a “trans-dimensional manufacturing plant” where he is fabricating 1,000 rockets. He has sold hundreds of rockets to art collectors and is working at a breakneck pace trying to get everything completed.
He has also tried to convince dealers and institutions to embrace the new technology. In November, the artist helped the Los Angeles County Museum of Art initiate its acquisition of an NFT from “Rocket Factory,” guiding the museum through the process.
“We hand-held them and taught them everything, and then we launched the rocket on the LACMA campus,” Sachs said. The institution is in the process of figuring out future preservation of the NFT and the rocket.
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