The trading volumes of several major non-fungible token (NFT) collections have exploded this year.
Combined NFT art and collections sales reached $ 7.4 billion in Q4 2021. The art NFT market has grown from $ 17.8 million on January 1 to $ 1.8 billion in total sales as of November 5, 2021. In early 2021, the NFT collectibles market started with a total sales volume of USD 55.5 million. Since then it has skyrocketed to $ 5.6 billion. According to Reuters, NFT’s total sales volume went from $ 1.3 billion in the second quarter to $ 10.7 billion in the third.
Record sales like the Bored Ape Yacht Club’s rare NFT, which sold for a record $ 3.4 million on October 26, put the frenzy in the NFT market in context. The sale closed on Sotheby’s online art auction platform Metaverse. The latest Bored Ape Yacht Club NFT record auction took place in September and closed at $ 2.9 million. The October 26 record had held alongside another auction that beat expectations on the same day, in which an auction of the Bored Ape Yacht Club’s NFT collection of 101 pieces sold for $ 24.39 million.
The Bored Ape Yacht Club collection, which launched in April 2021, has amassed nearly $ 1 billion in total sales this year, according to DappRadar. Artist Pak’s first Sotheby’s auction fetched $ 16.8 million also in April, and Christie’s followed with an NFT piece by artist Beeple sold for $ 69 million.
“What we are seeing with NFTs is the emergence of a whole new audience of merchants in the space, fueled by arguably the most crypto-friendly gateway ever seen,” Pedro Herrera, senior blockchain analyst at DappRadar, told Cointelegraph.
The “hype machine” is real
In April, the art and data science blog Artnome highlighted the correlation between the number of registered collector visits on SuperRare and the selling price of an NFT on the platform. The authors concluded that “the hype machine is real,” given that the data showed that the number of views of a work by registered collectors correlated with a higher selling price of the NFT.
This year there have been two rallies in the market that have also coincided with strong spikes in Internet searches for the term “NFT.” The first occurred after the highest price ever paid for an NFT (Beeple’s $ 69 million auction for his “Everydays: The First 5,000 Days” photo collage) was sold through Christie’s online auction site. March 11th. It was the first NFT to be auctioned at a major art auction house, and the hype quickly took over the market. Total monthly sales volume in the NFT art market increased from USD 32 million on March 1 to USD 83 million on April 1.
The second spike occurred on July 31, when sales in the collectible NFT market went from $ 1.2 billion in total annual sales to $ 4.65 billion on September 30. The peak of the search term “NFT” coincided with two of the most popular AI-generated collections, CryptoPunks and Bored Ape Yacht Club, which began to dominate the crypto art market.
Concentration of ownership
In an opinion piece published in the New York Times in May 2021, Hungarian network scientist Albert-László Barabási described his analysis of the transactions that took place on the SuperRare platform.
In the analysis, Barabási examined the number of co-owned NFT art transactions between collectors on the platform. He defined co-owned NFTs as art NFTs that had been bought and sold by more than one collector through SuperRare. He analyzed each work of art as a “node” in a “network” of transactions between collectors registered in SuperRare to see how many of the same pieces had been owned by different collectors.
His reasoning was that art collectors often collect and speculate on one type of art, be it an artist, a style, a genre, or a particular medium. Therefore, his hypothesis was that only a small group of collectors made the purchases of the high-end art NFTs.
Turns out he was right. Barabási found that a group of four collectors owned the majority of the works, with only three degrees of separation between any one of them and the 16,000 works of art they collected.
In a report published by the cryptocurrency analytics company Moonstream, which analyzed transactions on the Ethereum blockchain between April and the end of September, the authors found that there is a large inequality in the Ethereum NFT market, since the 16.71 % of the largest NFT owners control 80.98% of these assets.
Also, most of those purchases are for NFTs with more extrinsic than intrinsic utility (think utility tokens like name service NFTs) that have on-chain functionality in common versus the rarer collectible NFTs of the CryptoPunks that go by seven figures.
The report also found that 83.29% of the addresses that assumed ownership of an NFT did so for less than 10 Ether (ETH).
Although the Moonstream data examines the broader NFT market, it appears to support Barabási’s analysis that, for the high-end, intrinsic value crypto market, there is a small and small club of whales that most NFTs own. . Many of these owners are collectors and markets. However, the report also noted that the barrier to entry for the NFT market is low, and NFT’s ownership outlay is correlated with the NFT’s level of extrinsic utility.
In a poll conducted by The Harris Poll and Adweek in April, 40% of 1,088 respondents said they were “familiar” with NFTs and 81% said they knew about them.
“Overall, not many Americans have jumped on the NFT bandwagon yet; only 12% of respondents said they have invested in digital collectibles. But among millennials, that number is slightly higher: 27%. says it is currently investing in NFT. Millennials are also the most likely cohort to invest in cryptocurrencies, at 37%, “according to the survey.
“Unsurprisingly, those who consider themselves ‘collectors’ are also more likely to want a piece of the beautiful new cake of digital collectibles. For collectors overall, 22% claimed to own NFT, and in the For collectors with more than $ 100,000 in annual income, that figure rises to 33%. “
As reported in the Hiscox Online Art Trade Report for 2021, the current market situation has become difficult for many art veterans to understand due to the current prices of CryptoPunks and Bored Ape Yacht Club pieces. at auctions. Many do not know what is hype and what is not. However, perceptions are changing. The survey conducted by the report among art auction houses and online websites revealed that 14% of art market platforms already offer NFT for sale on their platforms, and another 38% surveyed stated that they plan to do it soon.
According to the report, there is speculation that the cryptocurrency and traditional art markets may merge into a permanent hybrid experience in which physical art galleries display crypto art and traditional works of art are digitized and sold online. . This year, at least four of the most expensive crypto art sales took place on traditional online art auction platforms.
Bobby Ong, CoinGecko Co-Founder and COO, told Cointelegraph:
“Perhaps one of the biggest signs that traditional art collectors are entering the NFT market is the fact that traditional auction houses like Christie’s and Sotheby’s are holding NFT auctions and closing the gap between NFTs and collectors. of art”.
In addition to the pandemic, the report highlighted two instigating factors that drove the proliferation of the crypto art market in 2021. First, two of the major traditional art auction houses, Christie’s and Sotheby’s, began accepting cryptocurrency as a form of payment. . Using cryptocurrency as a form of payment was a way for the two auction houses to attract and cater to wealthy crypto investors.
Second, NFTs provide artists with a public ledger that creates proof of ownership and authenticity for their works. In addition to protecting against theft and counterfeiting, this allows artists to collect royalties in the secondary market for NFT art.
Will digital art go mainstream?
Now that CryptoPunks hit seven-figure prices, what will it take for the NFT art and collectibles market to go mainstream?
In the April 2021 post on Artnome, the authors stated that one of the greatest achievements of crypto art so far has been “piercing the illusion of contemporary art as a space of” high “culture. The authors also expressed their intention to “point a way beyond the current situation, in which speculation appears to be as much an engine for the value of art as the works themselves.”
As Herrara of DappRadar said, “It is important to draw lines between the different types of NFTs. Sure, a CryptoPunk is now the equivalent of a Picasso. Therefore, it is out of the financial reach of most people. However, every day exciting new collections are coming, with the potential to become as valuable as CryptoPunks, priced below $ 400. So frankly, you don’t have to have millions in your pocket to participate. “