Art and NFTs
In 2023, significant sales activity continued outside the traditional art market, occurring both offline and through online platforms. These transactions supported direct sales from artists, creators, and resellers, showing varied performance over the year. Surveys of high-net-worth (HNW) collectors revealed a notable decrease in the use of external online platforms, dropping from 17% in 2022 to just 8% in 2023, including NFT platforms and Instagram (both at 3%) and other third-party platforms (2%). Contrary to the stereotype that younger collectors prefer social media and online channels, these platforms were more popular with Boomers and older collectors.
Art-related sales on non-fungible token (NFT) platforms are excluded from the 2023 art market sales figures, as they occur outside galleries, dealers, and auction houses. Despite a dramatic rise in activity in 2021, NFT sales experienced a significant decline over the past two years. Nonetheless, there was still substantial activity in these markets in 2023, with notable projects generating bursts of sales earlier in the year.
The rise of art-related NFTs was a major trend in 2021, with activity largely outside traditional art market frameworks, creating active primary and secondary markets. These marketplaces, with few barriers to entry, attracted speculative buyers interested in quick financial returns, leading to a surge in sales from $605,000 in 2019 to over $2.9 billion in 2021. However, sales declined rapidly in 2022 as the price of Ethereum fell and trading volumes decreased.
Data from NFT18.com, which tracks NFT sales across multiple networks, shows the rise and fall of NFTs, with the market stabilizing at a lower level in 2023. NFT platforms encompass various categories, including art, sports, music, and entertainment collectibles, as well as in-game and in-world digital items. In the art and collectibles segments, art-related NFTs made up just 12% of the value in 2019 but grew to a majority share of 67% by 2020. Since 2021, collectibles have dominated, reaching 84% by value in 2023, compared to only 16% for art.
Following a decline from 2021 to 2022, sales of art-related NFTs fell by another 51% in 2023 to $1.2 billion. Despite this significant drop, sales in 2022 were close to $2.4 billion, representing values over 100 times larger than in 2020. Notably, there were spikes in activity and value around key art projects, such as Jack Butcher's Checks, which generated over $350 million in sales within the first few months of 2023.
After outperforming the art segment in 2022, with values rising from $10.3 billion to $17.8 billion, the collectibles segment saw a significant decline in 2023, falling to just over $6.3 billion, a 64% year-on-year decrease. Experts attribute this to a decline in speculative activity that had dominated both the collectibles and art segments. The downturn stalled speculative buyers, leading many to hold onto their purchases rather than resell at a loss, causing a slowdown in resales. In 2021, the average time between the purchase and resale of art-related NFTs was just 33 days, compared to 25 to 30 years in the traditional art market.
The increasing involvement of different buyers and sellers in the art market, along with new methods of creating and transacting artworks, has introduced regulatory challenges. Key regulatory issues in the art market are discussed in Exhibit 1, and Exhibit 2 focuses on the legal framework for the market in China in 2024.
Charts illustrating key data points:
Use of External Online Platforms by HNW Collectors: Shows a significant decrease from 17% in 2022 to 8% in 2023.
Distribution of Platform Usage in 2023: Highlights that NFT platforms, Instagram, and other third-party platforms each accounted for a small share of platform usage.
Sales of Art-Related NFTs: Displays the rise and fall of art-related NFT sales from 2019 to 2023, with a peak in 2021 and significant declines in 2022 and 2023.
Sales of Collectibles Segment: Illustrates the growth and subsequent decline in sales for the collectibles segment from 2021 to 2023.
