The Decline of NFT Popularity and the Cryptocurrency Dilemma of Top Auction Houses

With Bitcoin repeatedly hitting new highs and Ethereum nearing its peak in 2021, those in the art world who once had high hopes for Crypto Assets are once again stirring. Early signs indicate that pioneering changemakers in the art industry are indeed seizing this trend.

A few weeks after the re-election of the US president, Crypto Assets surged rapidly, with the president showing a strong determination to support decentralized digital assets. Previously, a founder of a crypto platform purchased Maurizio Cattelan's "Comedian"—which was essentially just a banana taped to a wall—for $6.2 million at an auction house in New York. This exorbitant transaction attracted widespread attention, and the buyer completed the payment using Crypto Assets.

In this context, a well-known auction house will hold its first physical auction in Saudi Arabia next month, supporting payments in ETH or BTC. The auction house stated that this change could attract a new group of buyers in regions where digital art and Crypto Assets are active. The auction features a total of 119 lots, including modern and contemporary artworks from the West and Saudi Arabia, luxury goods, and jerseys from famous football players, as well as generative "AI data paintings" created by Refik Anadol. His work "Machine Hallucinations - Space | Chapter Two: Mars" (2021) creates surreal organic landscapes using space telescope data, valued between $800,000 and $1.2 million.

In fact, before the outbreak of the COVID-19 pandemic, the art market struggled to attract tech professionals due to a clash of styles. The rise of Non-Fungible Tokens (NFTs) has brought a new wave of wealthy Crypto Assets enthusiasts. NFTs are unique digital assets that link art with blockchain, often used for creating geometric abstract paintings and cartoon comics.

In 2021, several auction houses began accepting Crypto Assets for the purchase of certain physical artworks. An NFT work created by Beeple titled "Everydays: the First 5000 Days" was sold for an astonishing price of $69 million, with the buyer being the founder of a crypto investment fund.

Since then, eligible physical works have begun to lean towards a technological aesthetic. For example, a bright yellow painting created by Keith Haring in 1984, depicting a crowd mesmerized by computers, was sold for £4.3 million at an auction house. Currently, major renowned auction houses have established dedicated NFT and digital art platforms, where sellers and buyers can transact using Crypto Assets.

For the art market, practitioners hope to open channels for new buyers to enter the high-priced art field through NFT and related alternative coins. Some buyers have completed this process, starting with the purchase of digital artists' NFT works and spending $78 million to acquire a sculpture by Alberto Giacometti.

However, not everyone warmly welcomes the impact of Crypto Assets. There are views that the market has shaken off the turmoil caused by Crypto Assets speculators and is presenting a stable and thoughtful atmosphere. The image of Crypto Assets primarily attracting young buyers is at odds with the art auction market's own lack of diversity. For a long time, newcomers have often been met with skepticism, after all, the art market is largely characterized by conservatism and closedness.

In this complex market, concerns about the user base are just surface reasons; the core issue lies in the worries about its use. Art pieces can convert unstable paper profits into transferable tangible assets in the secret market, making them an attractive target for money launderers. The cryptocurrency-enabled NFTs are even more likely to become a new breeding ground for money laundering.

Some countries have taken measures to address this issue. China has banned Crypto Assets, while the European Union has tightened anti-money laundering and counter-terrorism financing regulations for businesses providing services related to Crypto Assets.

The compliance team of the auction house is prepared to take a cautious approach towards Crypto Assets. Apart from dedicated NFT platforms, only a few auction items qualify for the use of Crypto Assets. One auction house stated that its NFT sales have reached $150 million.

Despite the cooling of the NFT market, there may be a turnaround in the future as the market improves. According to the latest "Global Art Market Outlook" released by ArtTactic, 12% of experts are optimistic about the performance of NFTs this year, which is far lower than the 73% peak in 2023, but double that of 2024.

At the same time, an auction house stated that the average age of its NFT buyers is 42, lower than the average age of 54 for all auctions. This aligns with the auction house's strategic positioning towards the younger generation, as the new CEO, Bonnie Brennan, emphasized that the 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 downturn over the past two years and urgently needs fresh blood. ArtTactic data shows that the total auction sales of the three major auction houses decreased by 26% in 2024 and by 19% in 2023.

In this context, any opportunity that could bring traffic is worth seizing. Therefore, as the Crypto Assets stage lights up again, auction houses in distress have no choice but to prepare for this new challenge.