NFT as art: Investment is rising sharply

NFTs are important in two ways: they represent a digital work of art, and they can also serve as digital evidence of a physical work of art. Nearly two-thirds of all respondents now buy art or collectibles online.

And more than a quarter of art buyers plan to invest in NFTs this year. But about eight out of ten NFT buyers are more interested in returns than art. For almost everyone who spent at least 22,500 euros, return on investment is the main reason to buy NFT. These are some of the findings of the new Hiscox Online Art Trade Report.

investments in focus for NFT purchases

It turns out that more than eight out of ten (82 percent) of NFT buyers said they are more concerned about the investment than the art: 95 percent of those who spent 22,500 euros on NFTs in the last twelve months, said the return on investment was. the main reason for their NFT purchase. 96 percent of male buyers tend to buy NFTs for investment reasons. For women, it is only two-thirds (67 percent).

In addition, the results of the study indicate an increasing convergence between the traditional and the online art market. Nearly two-thirds of surveyed art buyers have purchased art or collectibles online – an increase over the previous two years: while more than eight out of ten existing online art buyers have purchased artwork online in the last 12 months, the figure was 67 percent in 2020 .

Sales of online art increased from € 4.3 billion to an estimated € 7.1 billion in 2020. Online sales are expected to reach € 12.2 billion in 2021. 84 percent of art buyers now believe the digital transformation in the art market will last; in 2020, it was only 51 percent.

“The online art trade continues to grow and is no longer just a latecomer, but has become an integral part of the art market – a real sign of the market’s maturity. However, the same cannot be said of NFTs, which are still in the ‘wild west’ phase of their development – it is still largely a speculative market, so we can expect a lot of ups and downs for now. “says Robert Read, director of art and private clients at Hiscox.

In the NFT gold rush

Eight out of ten (82 percent) NFT buyers said they are more focused on investment than art. 95 per cent of those who spent € 22,500 on NFTs within the last 12 months cited investment returns as the main reason for their NFT purchases.

Male buyers are primarily motivated by return on investment, female buyers to a lesser extent: 96 percent of male buyers bought NFT art for investment reasons and 58 percent because of their passion for digital art. Far fewer (67 percent) female leads bought NFTs primarily for investment reasons; 76 percent bought them because of their passion for art – especially digital art.

Source: Hiscox

The market is male-dominated, but we can expect more female buyers this year: Less than one-fifth (16 percent) of female art buyers surveyed said they had bought one or more NFTs, compared to 22 percent of male buyers who did, said the same thing. However, 27 percent of female art buyers said they would buy an NFT over the next 12 months, closing the gap with male buyers (28%).

Sounding the Ground: Of those art buyers surveyed who had purchased NFTs in the past 12 months, 35 percent had purchased NFTs with a total value of less than $ 900, while 37 percent had spent up to $ 4,500 on NFTs ; only 15 percent had previously spent more than 4,500 euros on NFTs.

The art and NFT markets are converging

There are signs of increasing convergence between the traditional art market and parts of the NFT market. More than a quarter (27 percent) of all art buyers surveyed said they are likely to buy an NFT within the next 12 months.

The change is permanent: In 2020, 51 percent of art buyers said they believe the changes in the way they buy art will be permanent. 18 months later, 84 percent of respondents believe that the digital transformation in the art market will be permanent.

Growth rates are high double-digit: Sales of online art have skyrocketed during the pandemic, from 4.8 percent in 2019 to 64 percent in 2020. Another strong sales growth of 72 percent for the first half of 2021, which is from online art sales platforms was reported, which leads to an estimated online turnover of 12.2 billion euros for 2021. However, it is estimated that growth will soon return to normal. On the one hand due to the maturation of the online art market and on the other hand due to the renewed interest in personal auctions after the pandemic.

Digital change in the art market

Auction houses are experiencing strong online growth: Heritage Auctions reported online sales of € 813 million in 2021 (an increase of 79 percent compared to 2020). At Phillips, online auctions only grew by 70 percent last year, while Christie’s reported a 41 percent increase in online sales only for 2021. Sotheby’s online sales grew 22 percent in 2021 after phenomenal growth in 2020 (824 percent). Despite slower growth in 2021, Sotheby’s accounted for 65.8 percent of the three auction houses’ sales online only last year.

Buyer confidence is rising

53 percent of online art buyers surveyed recently said that the pandemic and the shift in the art market to the Internet has increased their confidence in buying art and collectibles online, up from 42 percent by 2020.

Source: Hiscox

Three out of 10 young collectors bought their first artwork online, up from 14 percent in 2020. And nearly half of new art buyers who started buying art less than three years ago made their first art purchase online; In 2020, it was 30 per cent. The online art market has become an entrance into the art world for new art buyers who have never been to a gallery or auction house.

Sale of new media art

Of all art buyers surveyed, 41 percent said they bought new media art online in 2021, up from 17 percent in 2020. This equates to the rapid increase in new media art published as NFTs.

Digital passport for the artwork

“NFTs are important in two ways: they embody a digital work of art, and they can also serve as digital evidence of a physical work of art. The latter point has game-changer potential in terms of origin: Ensuring traceability is often difficult with works of art, but very important for the value – through which hands has a work of art passed, in which galleries was it previously exhibited? Above all, modern works of art have the chance for a complete origin as a differentiating function through NFTs, “says Alina Sucker, Underwriting Manager Art & Private Clients at Hiscox.

Alina Sucker-Kastl, Underwriting Manager Art Private Clients Hiscox Germany

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