NFT And The Financialisation Of The Art World

This article was originally published on Hong Kong art media CoBo Social on 17 March 2021.

This past year or so, the world has been grappling with the pandemic, its ensuing disruption and the accelerated impact of the fourth industrial revolution, making the reduction of social and fiscal inequity one of the key priorities of this century.

In fact, just this month, the US government passed a US$1.9 trillion COVID-19 relief bill that promises to increase the incomes of the poorest 20% of Americans by 20% and cut child poverty by half. It also includes the “biggest federal investment in Native American programmes in history” at US$31 billion and “the most important legislation for Black farmers in half a century” providing US$5 billion through debt, relief, grants, education and training.

Yet, the art world seems to have completely different priorities, intent on continuing its ongoing trajectory of increasing financialisation, thanks in part to the current obsession with NFT, or non-fungible token.

These are files which contain a certificate of authenticity for a real or virtual object, such as a digital artwork, a video or even a Tweet. They are stored on a blockchain network, with chain of custody marked permanently in the file. Typically, cryptocurrencies such as Ethereum are used in NFT transactions.

Launched on 25 February 2021, Christie’s live online auction sale of a digital collage Everydays: The First 5000 Days (2021) by graphic artist Mike Winkelmann (Beeple) closed at US$69 million on 11 March, making him one of the “top three most valuable living artists”. The sale of this digital work to Singapore based founder of the world’s largest NFT fund, who goes by the pseudonym “MetaKovan”, was a climactic point in the recent ascent of crypto art, pegged to the rise in cryptocurrencies.

While the origin of art on blockchain is largely debated, the recent interest in NFT from the art world can be traced back to last October’s sale of a 2019 Robert Alice work by Christie’s with an accompanying token. It was the “first time a major auction house sold one of these digital tokens”.

Following Christie’s announcement of the Beeple sale in February, an NFT of the iconic Nyan Cat GIF went for the sale price more than US$560,000. Then, Andrés Reisinger, a designer of “whimsical 3D furniture renderings”, sold 10 of his NFT verified designs for a total of US$450,000 within just 10 minutes in an online auction. Around this time, Beeple sold another digital work Crossroad #1/1 (2020), for US$6.6 million, to the very same “MetaKovan”, on the NFT marketplace Nifty Gateway.

Art world provocateur Kenny Schachter also got in on the action, writing about his adventures in the new virtual art market and how he tokenised his grandmother. Big name artists such as Shepard Fairey and celebrities such as Grimes have begun doing NFT drops. Next month, Schachter is also curating an NFT exhibition at the German conceptual gallery Nagel-Draxler and at two virtual crypto museums. At the end of March, the UCCA Center for Contemporary Art in Beijing is launching the first museum show featuring crypto art.

Concurrently, there has been quite a bit of talk, especially amongst established art critics, whether NFT can be construed as real art or not, since it lacks physicality and supposedly intrinsic artistic value with some digital works described as “rote regurgitation of memes and demeaning, off-colour gags”.

This is beside the point, mainly because “the elite art market, though scaffolded by an industry of experts and tastemakers that ostensibly influence the value of individual works of art, has been unhinged from any material reality for decades. Many buyers buy art because it is valuable, not because it is art, and then store it in warehouses until they see fit to liquidate it as an asset on their books and sell it to a new buyer who also values it as a financial asset.”

Therein lies the crux of NFT. It is very much, yet another, inevitable step in the path of financialisation the art world has been on for a while now.

In an interview last year, Mary Rozell, Global Head of UBS Art Collection, said, “10 years ago when people were talking about artists and investments, a lot of people were upset about it. Every art fair had a lot of panels and this was the number-one topic. There was a lot of pushback, but now it has become accepted and institutionalised that art investing takes place. There are more forms and vehicles to invest in art, with all the same caveats, but it’s become more of the norm.”

Then the pandemic hit, and this trend reached a whole new level. In March last year, Bloomberg reported a twofold increase in inquiries from über-wealthy art collectors raising money from their collections, either to free up cash for investment opportunities or to offset costs. More recently, Sotheby’s CEO Charles Stewart observed that the rise of younger collectors, who mostly view art as a shorter-term asset, is also increasing art loans.

Noah Davis, Specialist in Post-war and Contemporary Art at Christie’s, referred to the “boom in cryptocurrencies and the GameStop revolt against Wall Street this year as evidence that financial marketplaces are swiftly changing.”

The comparison with GameStop is highly revealing of the mindset behind the high-octane sales of crypto art. Limiting our lives to physically and socially singular experiences, the pandemic has inadvertently unleashed the economic impact of boredom. “Feeling bored may result in different kinds of behaviours, like increasing novelty seeking and increasing reward sensitivity,” said Erin Westgate, an assistant professor of psychology at the University of Florida, who studies boredom.

Westgate also pointed out that boredom is often a sign that something does not feel meaningful. This explains, in part, why the GameStop saga was also motivated by the impetus to stick it to the hedge funds which had bet the company would fall.

Not dissimilar to the crypto art scene wanting to topple the bastions of high art in the name of elevating long overdue opportunities for digital artists who rely mostly on client work to finance their artistic expression. For example, Winkelmann’s freelance work involves graphics and animation for live events, including the MTV VMAs and the Super Bowl as well as work for Apple and Elon Musk’s SpaceX. Though, that’s not too shabby, to be honest.

The truth is, as game designer and technologist Greg Borenstein tweeted, similar to most anti-elitist rhetoric, many NFT proponents who deem the art world as “not truly populist”, are essentially pushing against one insular elite (the art world) on behalf of another gatekeeping elite (the tech world).

“So far NFTs don’t provide anything other than new tools for treating art as commodities. They don’t do anything for improving access or creating context for critical or reflective work—though I’m hopeful we’ll see more moves in these directions in the future,” he added.

Most importantly, while major governments, vulnerable communities, foresighted leaders and organisations are working towards initiatives that engender long-term ecological and economic sustainability, the current moves by the art and tech worlds, and its related networks, to fuel the rise of crypto art seem largely out of sync.

The adverse ecological implications of crypto mining such as carbon emissions, alongside government crackdowns on crypto mining facilities due to concerns about fraud and energy waste, seem largely incongruous with the latest “green” moves by the art world, such as Hauser & Wirth “pivoting its business operations” to cut carbon emissions by 50% by 2030. The mega gallery is even hiring a new head of environmental sustainability. Ironically, this month, Christie’s became the first auction house to announce that it would reach net-zero carbon emissions by 2030.

There are also copyright issues, which looks set to get even muddier. Most recently, Global Art Museum (GAM) posted digital images of art from museum collections on NFT marketplace OpenSea with the aim of transforming “historic art into blockchain-secured NFTs” and “disrupting the art museum industry”. While some of the art is open access, confirmed by at least one institution, in the face of online backlash, GAM is currently claiming it was all a PR stunt.

Perhaps NFT proponents should pay heed to the fate of the original meme stock Hertz which only added more money to the pockets of the company’s creditors, “some of Wall Street’s giants of distressed investing”. The people who bought shares of the bankrupt car rental company to drive it up and stick it to the power got nothing.

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