The heat of NFTs is fading, and top auction houses are making a last-ditch effort with "crypto."

Author: Tuo Luo Finance

"The friends of cryptocurrency have left. As soon as the music stopped, they immediately fled." During the October Paris Art Basel fair, art consultant Wendy Goldsmith stated in the solemn environment of the Grand Palais in Paris. 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 also eager to try.

Early signs indicate that pioneering art industry changemakers have indeed gained traction. Just weeks after U.S. President Donald Trump's re-election, cryptocurrency surged, and Trump showed strong support for decentralized digital assets. Prior to 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 exorbitant auction made headlines in most media, and he paid for it with 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 buyer demographic 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 goods, 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 genuinely brought in some new cryptocurrency millionaires and billionaires. NFTs are unique digital assets that connect art with blockchain, used for creating geometric abstract paintings and cartoon comics.

In 2021, Christie's and Sotheby's began accepting cryptocurrency for the purchase of certain 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 tilt towards tech-savvy 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. However, the auction house was unwilling to confirm whether it accepted a cryptocurrency payment proposal. Christie's condition for accepting other currencies is that the seller is 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 dedicated NFT and digital art platforms, 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 the screensaver-style "Cube" NFT by digital artist Murat Pak, which sold for $1,500 each on Sotheby's dedicated Nifty Gateway platform.

A few months later, according to Son's social media, he purchased "Untitled (Kimpeson)" (2001) for HK$2.5 million (approximately $300,000), a painting by the hot artist KAWS featuring the artist's cartoon character with X-shaped eyes, sealed in blister packaging. Just five months later, Son ventured into heavyweight modern art, buying 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 turbulence caused by cryptocurrency speculators. The reason lies in the fact that the image of young buyers in cryptocurrency 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 traits.

In this tricky market, skepticism and concerns about the user demographic 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 Chinese law firm Jingtian Gongcheng, in the "2024 Basel Art Fair and UBS Art Market Report." In the European Union, the latest anti-money laundering and counter-terrorism financing rules have tightened regulations on all businesses providing services related to cryptocurrency assets, including a ban on 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 items 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 down, and the market has lost most of its heat, but as the market improves, there will be opportunities for 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 buyers is 54. This aligns with Christie's strategy to target the younger generation, and it is also a key strategy 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 infusion 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, and 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 desperate situation, can only prepare to join this grand performance.