$69 million for something that is free

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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on March 17th, 2021.

5,000 free Instagram photos – for $69 million. The auction price for “Everydays: The first 5000 days” turned the art world upside down. Signs of both a bubble and careless spending? Rather, a new type of investor has presented itself – those who prefer non-traditional asset classes such as cryptocurrencies and shares in collectibles.

When the historic auction closed last week, it was not Agnes Martin, Mark Rothko or Yayoi Kusama who’s signature was on the art. Nor was it a watercolor painting that was sold – but a jpeg by Beeple, whose raw material you can find for free on Instagram. The price: around $69 million.

The auction was, as you probably already suspected, unique. And not just for the reasons just mentioned, or that theauction house Christie’s for the first time accepted the Ether as payment. Nor because the total was the third highest ever for a work of art sold by a living artist, second only to Jeff Koons and David Hockney. But mainly because it marked NFT’s entrance into the real art world.

NFT stands for “non-fungible token” and can best be described as a kind of digital ownership certificate. By trading with the certificate, you can ensure both who is the rightful owner and that the work in question is genuine. The underlying technology also enables the creator of the work to receive a share of each future transaction – a kind of digital resale right.

All of this may sound odd. But in many ways, it is not surprising that the sale takes place. Rather, it only illustrates the trend of a new type of investor. Those who complement traditional assets such as stocks, mutual funds and paintings with either cryptocurrencies or pop-cultural objects, but whose purpose is the same – to make money through speculation and perceived market knowledge. The methods and types of assets are different.

The phenomenon is so big that new marketplaces are emerging for each individual niche. So far, they fall into four different categories:

  • Crypto exchanges: A mixture of an exchange and a bank that enables transactions between different cryptocurrencies. Most famous here is Coinbase, which, ironically, will be listed on the US Nasdaq in the days to an estimated value of 100 billion dollars.
  • Digital art & NFT galleries: Marketplaces where artists and cultural creators can sell the rights to their digital works. It’s a virgin market, but Opensea and Nifty Gateway are two platforms that are often mentioned.
  • Fractional investment markets: Markets that buy cultural artifacts such as art or collectibles and enable people to buy shares in them. A big player here is called Otis, which offers both video games and skateboards as items you can buy shares of. Otis stores the objects themselves and acts as a guarantor of its quality and authenticity.
  • Pop culture exchanges: Trade with clothes, shoes and accessories that are often released in limited editions. Stock X and Goat are two of the largest, selling limited Nike shoes and Cartier watches.

These are all forms of stock exchanges but without stock trading. Instead, they use technology that ensures ownership of something that in many cases you will never physically own. Instead, ownership represents something that you believe in, and that you believe will increase in value. Just as a share is to a company – that sense is not linked to a physical share certificate.

The NFT market in particular is in the middle of a gold rush. History suggests that many enthusiasts will be burned and disappointed if, or when, the bubble starts to burst. At the time of writing, Twitter’s and Square’s CEO Jack Dorsey has a bid of $2.5 million for his first tweet. Elon Musk, CEO of Tesla and Space X, just released a song (!) about NFTs as an NFT in itself. So there are tendencies that things are starting to derail. But the underlying behavior and these new markets are not likely to disappear. We have had stock trading since the 17th century. What’s to say that only stocks and commodities are things you should invest in?

Back to the auction at Christie’s. Who bought Beeple’s work? An investor who goes by the pseudonym “Metakovan”. He told Bloomberg confidently that he thinks it will be worth over a billion dollars, “I just do not know when.”

This column was first published in SvD Näringsliv, in Swedish, on March 17th, 2021.

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