Christie’s, the iconic art auction house that was founded in London in 1766, auctioned a digital art NFT in March, 2021, by the artist Beeple. The piece titled, Everydays: the First 5000 Days, sold for $69 million and is still the highest-valued NFT sale to date.
In the first article of this series, we explained how NFTs have created a way to digitize the traditional art market, while avoiding all the problems that used to come with digitization. This is why we’re seeing the likes of Christie’s and Sotheby’s, who have been in the traditional art market for hundreds of years, venture into the world of NFTs.
To art collectors, this is a strong signal of the viability of NFT art investments as an alternative to physical fine art investments. NFTs allow easy evidencing of authenticity and ownership, and they do not require the same kind of maintenance that physical artworks do, especially considering the longer term of art investments.
These are but some of the ways that digitization makes art investments more convenient and accessible, and as an NFT collector, you may be thinking about investing in some digital art NFTs. This guide will walk you through some points to consider when making investments in NFT artworks.
How To Invest In Digital Art NFTs
The decision to buy an NFT artwork hinges on many of the same considerations you would make when buying a traditional artwork. Art is subjective, so any artwork that speaks to you personally is worth buying if your goal is to simply collect artworks you enjoy and support the artists who make them.
As an investment, however, NFT artworks have more points of consideration than traditional artworks. NFTs have different layers of value, features, and functionality that will affect their appraisal. Here’s what to look for:
Added Value
NFT artworks differ from traditional art in that they can have a lot of added functionality. Artists have the option to add unlockable content, which are additional files that are accessible only by the buyer of the NFT. This could include signed works, videos of the creation process, and much more – the possibilities are limited only by the artist’s imagination.
Some artists also grant special privileges to their NFT holders, by giving them access to future events and art shows, or early previews of future works. Especially with NFTs, good investments are the works created by artists who have a plan to add value to their art over time.
Technological Standards
Art may be subjective, but technology is not. When buying a digital artwork, factors such as file format and storage can really affect the quality, utility, and value of your art. Before you buy an NFT artwork, check out the file format and resolution. No matter how good the art is, if it comes in a low-quality file format, it will not be a good investment. If you intend to print or digitally display your NFT artwork, it needs to be in the correct size or resolution. Similarly, where the file is stored will tell you how risky an investment is. Files stored on IPFS are more secure than files on a centralized server, because centralized servers mean a single point of failure.
Historical Sales
Art is a diverse market, and it’s important to research your favourite artists, how they have grown their brand, and whether this growth is sustainable. Knowing how many times an artwork has been traded, and how its price has evolved over time will give you a better understanding of its value as an investment.
Thanks to the traceability of the blockchain, it’s very easy to do this with an NFT artwork. On Mintable, you can see the entire transaction history of a single NFT on its listing page.
Similarly, you can assess the popularity of an artist by looking at their entire store’s sales history. Looking at the data will help you make more informed decisions about your investment.
Aside from the points above, here are a few additional things to consider:
Art is a long-term investment
Traditional artworks are a long-term investment, and so are NFT artworks. Some people may choose to do a quick flip and sell an artwork immediately for a small profit, but generally, it’s better to hold them for at least a few years. The art market follows its own rules, and unlike other types of NFTs such as collectibles, their value isn’t tied as strongly to the rest of the market.
Consider Fractional Investments
Based on the premise that expensive artworks appreciate better than cheaper ones, fractional NFTs were created to increase the liquidity of NFTs and open up high-value investments to a wider pool of small investors. Fractional.art is an NFT platform that allows you to buy fractional shares in an NFT artwork, so that you can invest in high-profile NFT artworks without having to fork out a fortune.
Buy Art You Love
As with any investment, there’s no guarantee that the NFT artwork you buy will reap you the expected returns. While this article has covered several ways to assess an NFT artwork, there is no guaranteed formula for picking winners, and no substitute for genuine interest. Not every NFT art investment you make will be a success, but if you buy art you love, you cannot lose.
