Crypto or NFT art: What is it & should you invest

In less than a decade, NFTs have invaded the contemporary art market, changing the face of a previously well-established and standardized sector. What does the future hold for this new blockchain-based virtual art? Should we invest in crypto or NFT art? Does the market fluctuate too much? Can they be a secure and worthwhile investment? Artalistic breaks down these questions so that you can make a more educated investment.

Are non-fungible tokens creating a revolution?

Should you invest in NFT art or a physical painting?

Are NFTs (non-fungible tokens) - also known as crypto art - capable of revolutionizing the contemporary art market? This question is being asked more and more frequently in a sector that has until now been subject to traditional standards for buying and selling based on a work of art’s material aspects.

Some pieces of crypto art, like Beeple’s NFTs, attract large numbers of investors, allowing their value to accrue and even be exchanged for millions of dollars. However, NFT art seems to be as profitable as it is risky; some experts say they’re a bubble poised to pop and do not recommend investing in NFT or crypto art.

Over the last two years, the value of NFTs on the digital art market has multiplied by 10. Figures for 2021 revealed that NFTs were generating up to $10 million per day!

What is NFT or crypto art & should you invest in this rapidly expanding market?  

Since their creation in 2014, NFTs have been rapidly gaining notoriety as a popular way to buy and sell crypto art and partake in this relatively new branch of speculative trading.

An NFT is encrypted computer data composed of a certain type of cryptographic token that represents real-world objects. Unlike physical money and cryptocurrencies that have a set value and which are “fungible,” or capable of being traded or exchanged for one another, NFTs have a value that is attached to a unique digital signature that makes it impossible to be exchanged for one another (hence, non-fungible). This quality makes them rare, creates digital scarcity and brings them added-value as a unique object. This is the main argument in favor of NFTs, as traditional digital content is usually exchangeable and infinitely duplicable.

Is investing in NFT or crypto art being used as a postmodern panacea?

As such, an NFT’s value is defined in the same way one would define the value of classical paintings. It seems increasingly difficult to make a fundamental distinction between these two art forms: is a real-world painting more valuable than a non-tangible NFT? Will investing in digital NFT art become the new norm in the next century?

The pros and cons of investing in NFT or crypto art

Yes, it’s the future of art!

NFTs are binary, virtual data stored and identified on a blockchain. This blockchain is a distributed pubic ledger that records transactions and is the process that makes ctyptocurrencies – like Bitcoin and Ethereum – possible.

Just like iconic Impressionist or Pop Art paintings, NFTs are unique and numbered, making them technically just as rare as some of the paintings exhibited in the world's greatest galleries or museums.

These digital artworks are “minted,” instantly endowing them with the power of rarity and guaranteed by a digital certificate of authenticity. It is now possible to sell a piece of digital art as an original.

The benefits of NFT art are also manifold:

- Digital artists find new markets and modes of remuneration

- Digital art adds to the democratization of art

However, this investment method may not be as idyllic as it seems; investing in NFT art is perhaps not as promising as the current craze suggests.

No, this new market is not very reliable!

Quasi inexistant exhibition value 

NFT’s legitimacy as an artform is often devalued due to their lack of exhibition value. A painting is a physical object that can be placed on display for people to admire in a museum or a home. Tokens stored on a computer hard drive or a cell phone can never be enjoyed in such a way.

A uniqueness that’s not so unique

Even though an NFT is unique, it can be split or shared. The thousands of parts it is broken into can be sold to several people. The work of art entitled The Merge is a prime example of this. It was divided into 266,445 digital units that were bought by 28,983 buyers!

A very volatile market

Even though investing in crypto art seems promising and NFT artworks currently hold value, the market remains unreliable. Presently the cryptocurrency market suffered one of its largest collapses. Just as Bitcoin and Ethereum have been in free fall in recent weeks, NFTs have taken a huge blow, following an impressive boom in August 2021. The traditional art market - one of the oldest in the world - is considered to be more stable than the NFT art market. A majority of collectors still prefer physical art over its crypto counterpart.  

A negative impact on the environment

Blockchain’s negative impact on the environmental is also slowing down investors. Cryptocurrencies and NFTs are stored on very energy-intensive infrastructures (multiple graphics cards, large computer servers, cooling systems). Ethereum blockchain has recently proposed a major upgrade that should cut energy consumption, which specialists say will save three quarters of the energy needed for its operation until now.