- Sotheby’s specialist Michael Bouhanna prices NFTs by “taking the temperature” of the market.
- Both Bouhanna and colleague Matthew Iles have converted traditional art clients to NFT collectors.
- They predict that generative and community-based art will continue to be popular.
After centuries of dealing in fine arts and rare goods, any mention of the name Sotheby’s immediately connotes luxury and opulence. But now, the auction house is venturing into the Wild West of non-fungible tokens, or NFTs.
Like rival auction house Christie’s, Sotheby’s first launched a sale of NFTs — certificates of ownership representing mainly digital assets — earlier this spring. In its inaugural sale, Sotheby’s raked in $17 million from a collection called “The Fungible” by anonymous digital artist Pak.
“It’s previously been impossible to appreciate this type of artwork in the same commercial way because it was simply impossible to possess digital art as ownable,” said Matthew Iles, managing director of Sotheby’s Metaverse, the auction house’s recently launched dedicated NFT marketplace. “NFTs have unlocked demand that previously couldn’t be expressed commercially.”
Valuing NFTs versus traditional artwork
To value NFTs, one must “take the temperature” of a certain artist or market, said Michael Bouhanna, co-head of Digital Art Sales at Sotheby’s.
“When we price the NFTs, we look at the market volume — the last sold and the current demand — by talking to all the collectors,” he elaborated. Closer to the sale date he reviews the price estimate of an NFT in ether, the cryptocurrency of choice for NFT sales, and updates the price of the piece in USD or the applicable fiat currency depending on ether’s price fluctuations.
Bouhanna says that Sotheby’s sources NFT artwork in a similar fashion to how it selects the physical artwork offered in more traditional auctions.
“We try to source artists that already have an established market,” he said. “What’s very important for our collectors is that when they buy at Sotheby’s, they’re confident that there will be a secondary market life to their work — that it’s not just a one-off.” Ensuring a secondary market allows buyers the ability to resell a piece in the future.
With market knowledge of artists in hand, Bouhanna says that Sotheby’s then applies its own in-house expertise. After all, most NFTs boil down to artwork, an area the auction house is very comfortable with.
“We use our knowledge in the history of art and our connections within the collector’s museum to really understand who will be the next artist that might be important in the NFT space,” he explained.
Along with a new, experimental landscape comes a completely new set of clients.
Iles says that NFTs resonate with a newer, younger audience, with Bouhanna noting that the bidders of their June Natively Digital sale were composed of approximately 30% existing clients and 70% new clients. Still, he says the number of new clients is “quite considerable” and “constantly growing.”
Bouhanna adds that Sotheby’s has been very successful in converting some collectors of traditional art to NFTs by offering educational content about the medium.
“Actually, some of our top clients started to enter into this market quite aggressively because they believe in the NFT as a medium to pass the test of time and to be a real innovation within the history of art,” he said.
Meanwhile, some traditional art collectors don’t need to be convinced when it comes to NFTs.
Contemporary art collectors, especially those dealing with conceptual artists like Daniel Buren and Sol LeWitt, already receive a certificate of authenticity when they make a purchase. That’s why they don’t really have an issue buying non-fungible and non-physical pieces, since an NFT is the same concept as that certificate — it’s just a digital version, explains Bouhanna.
“The concept of having an immaterial work is not really a barrier for some of our clients,” he explained. “Then, it’s getting them to be confident with the crypto tech side of it.”
According to Iles, NFT collectors have the same intentions as traditional art lovers.
“The primary interest is in the art itself — the provenance, the narrative, the history, the artist, and everything that the art represents,” he said. “Just like any other work of art, perhaps the collector also has an investment perspective, but I don’t think it’s any different than the wider collecting world.”
NFTs are here to stay
Bouhanna points to the resilience of existing NFT collectors and the entrance of traditional clients like investment funds as proof that the market isn’t a “bubble.” Collectors have learned a lot from the past few months as the NFT market has cycled through peaks and dips, and he says they’ve “become much more selective in what they buy.”
He sees many possibilities in the space, especially with the growing conversation surrounding the Metaverse. The younger generation in particular, he says, is especially interested in collecting gaming items.
For the future of NFT art, Bouhanna predicts that both NFTs with a strong community and generative artwork such as the “Fidenza” collection will continue to be very important. He attributes the continued success of generative artwork to its longevity.
“It’s a very established art movement that’s existed since the 1960s. These generative artists were always blocked and not able to sell their work because they’re computer based,” he explained. “But now, they’re finally able to actually sell them in their original state.”