Source: Financial Times

Translation: Kris

"The friends of cryptocurrency have left. As soon as the music stops, they flee immediately." During the October Art Basel fair in Paris, art consultant Wendy Goldsmith remarked in the solemn environment of the Grand Palais. However, with Bitcoin continuing to break new highs and Ethereum approaching its 2021 peak, those in the art industry who previously had high hopes for cryptocurrency are now eager to try again.

Early signs indicate that pioneering art industry changers are indeed gaining traction. Just weeks after U.S. President Donald Trump's re-election, cryptocurrency surged rapidly, with Trump showing strong support for decentralized digital assets. Just before this, Tron founder Justin Sun purchased Maurizio Cattelan's "Comedian" (2019) at a Sotheby's auction in New York for $6.2 million, which was essentially a banana taped to a wall. This high-priced auction made headlines in most media, and he paid for it using cryptocurrency.

In this context, next month, Sotheby's will accept ETH or BTC as payment at its first auction in Saudi Arabia, marking the first time a traditional auction house supports cryptocurrency payments for an entire live auction of physical items. Sotheby's stated that this change could attract an additional group of buyers in regions where digital art and cryptocurrency activities are very active. The auction will feature 119 lots, including modern and contemporary artworks from the West and Saudi Arabia, luxury items, and a jersey worn by footballer 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 struggled to attract tech industry individuals due to inherent stylistic conflicts. The rise of non-fungible tokens (NFTs) has indeed brought in some new cryptocurrency millionaires and billionaires. NFTs are unique digital assets that link art with blockchain, used to create geometric abstract paintings and cartoon comics.

In 2021, Christie's and Sotheby's began accepting cryptocurrency for the purchase of some physical artworks. Christie's previously auctioned Beeple's "Everydays: the First 5000 Days," an NFT that stitches together 5,000 digital images, many of which are satirical, including a giant naked Trump sitting in front of the Capitol. Its final buyer was Vignesh Sundaresan, founder of the cryptocurrency investment fund Metapurse, also known as Metakovan, who purchased the artwork for an astonishing $69 million.

Since then, eligible physical works have begun to lean towards tech tastes, including a bright yellow painting created by Keith Haring in 1984, depicting a crowd mesmerized by computers, which sold for £4.3 million at Christie's auction house. However, the auction house was unwilling to confirm whether it accepted cryptocurrency payment proposals. Christie's accepts other currencies on the condition that sellers are willing to accept cryptocurrency, while bidding still occurs in local fiat currency, as do the auction house's fees; Sotheby's itself does not hold cryptocurrency. Now, every well-known auction house has its own dedicated NFT and digital art platform, such as Sotheby's Metaverse and Christie's 3.0, where sellers and buyers can use cryptocurrency.

For the art market, practitioners hope that using NFTs and their associated alternative currencies can broaden the channels for new buyers to enter the typically higher-priced art sector. Masayoshi Son personally completed this journey—spending over $6.2 million in the process. In early 2021, he purchased digital artist Murat Pak's screensaver-style "Cube" NFT, which sold for $1,500 each through Sotheby's on the dedicated Nifty Gateway platform.

A few months later, according to Son's social media, he bought "Untitled (Kimpeson)" (2001), a painting by the hot artist KAWS featuring the artist's cartoon character with X-shaped eyes, sealed in blister packaging, for HK$2.5 million (approximately $300,000). Just five months later, Son entered the heavyweight modern art arena, purchasing Alberto Giacometti's "The Nose" sculpture for $78 million. This is a sculptural work cast in 1965, depicting a long-nosed head trapped in a cage.

However, not everyone in the art market is welcoming the impact of cryptocurrency with optimism. Goldsmith assessed the atmosphere during the Paris fair, noting that the market atmosphere is stable and well-considered, undoubtedly free from the turmoil caused by cryptocurrency speculators. The reason is that the image of cryptocurrency primarily being bought by young buyers clashes with the art auction market's own lack of diversity. There is also a long-standing objective fact that new entrants are often viewed with suspicion, as the art market is largely characterized by conservatism and closed-off nature.

In this tricky market, skepticism and concerns about the user base are merely surface reasons; the core issue lies in the concerns about usage. The allure of artworks—in a secret market that can convert unstable paper profits into transferable tangible assets—has significantly increased its appeal to money launderers, and cryptocurrency-based NFTs are more likely to become a new playground for money laundering.

In China, cryptocurrency is banned, "due to numerous anti-money laundering cases," wrote Angell Xi, a partner at the law firm Jingtian & Gongcheng, in the "2024 Basel Art Fair and UBS Art Market Report." In the EU, the latest anti-money laundering and counter-terrorism financing rules have tightened regulations on all businesses providing cryptocurrency-related services, including banning anonymous payments.

Auction houses' compliance teams are prepared and have a relatively cautious attitude towards cryptocurrency. Outside of dedicated NFT platforms, only a few auction lots qualify until Sotheby's auction in Saudi Arabia on February 8, while Christie's stated that its NFT sales have reached $150 million to date, including Beeple and its fees.

As of now, NFTs have cooled, and the market has lost most of its heat, but as the market improves, there may be a turnaround. According to ArtTactic's "Global Art Market Outlook" released this week, 12% of experts are optimistic about NFTs' performance this year, a figure still far below the previous high of 73% in 2023, but double that of 2024.

Meanwhile, Christie's stated that the average age of its NFT buyers is 42, while the average age of all auction participants is 54. This aligns with Christie's strategy to target the younger generation, which was also emphasized by Christie's 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 noticeable slump over the past two years, urgently needing the introduction of fresh blood. According to ArtTactic data, the total auction volume of Sotheby's, Christie's, and Phillips auction houses fell by 26% in 2024, while it dropped by 19% in 2023.

In this context, perhaps any bit of traffic that can be captured is beneficial, so as the cryptocurrency stage lights up again, the auction houses, facing a last-ditch effort, can only prepare to join this grand performance.

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