This Is Exactly Why You Should Be Excited About the Potential of NFTs in the Art Market
Interview with Adam Szymanski, PhD
I continue to discover inspiring voices in the art market.
As much as I love writing about the lives of legendary artists, I also enjoy learning about the current art market and the people who make it possible.
Several weeks ago, I shared my interview with
, a founder and director of Less Than Half, an organization that teaches women how to collect and support the work of women artists.Hall is based in New York City. Today, we “travel” to Berlin, Germany, to speak with art advisor Adam Szymanski, PhD.
The interview covers a wide range of topics:
Adam’s journey from cinema to fine art
Valuing art as an investment vs. S&P 500
The current state of NFTs and their future
Digital art vs. traditional art
With so much to cover, let’s get into it.
Adam, could you please share a little bit about your background and what sparked your interest in art? Why did you decide to become an art advisor? For our readers who may not be familiar with the role, what do art advisors do, and how do they work with clients?
Thank you for asking, it’s a pleasure to be speaking again.
I came to ‘fine art’ through the ‘seventh art’ – an endearing term used for cinema, as it can be viewed as a combination of the six preceding art forms: architecture, sculpture, painting, music, poetry and literature, and dance.
During my undergraduate years, I developed a deep love for cinema and voraciously explored art film movements, which blessed me with some of the most beautiful moments of my life.
Iranian new wave films of the 1990s
Taiwanese new cinema of the early 2000s
The poetic realism of Jean Renoir (son of Impressionist painter Pierre-Auguste)
The melancholy aesthetics of the Berlin School
The list could go on and on.
These art cinema movements, among many others, allowed me to travel across time and cultures, opening my eyes to a beauty that was missing in my everyday life.
My close relationship with cinema naturally led me to the gallery space and to the concept of “expanded cinema.” It’s not a coincidence that many of the most influential filmmakers of our time are also highly respected contemporary artists who work with moving images.
Apichatpong Weerasethakul, on whose work I published a collectively-written, open access and bilingual book, Nocturnal Fabulations, has recently been ranked as one of the most influential people in the art world by ArtReview’s annual top-100 list.
Another notable example is Steve McQueen, one of the first video-based artists to win the Turner Prize. He has gone on to have an immensely successful career as a film director after originally being positioned as a video artist.
Harmony Korine has also recently presented an intriguing cinema-inspired show of paintings at Hauser & Wirth.
Much more can be said about the overlap between contemporary art and cinema. I will likely publish a book on the topic in the future. For now, however, it suffices to say that cinema ushered me into art.
I decided to become an art advisor in 2022. By this point, I had completed my PhD, published my first monograph, Cinemas of Therapeutic Activism, and drafted the manuscript for my forthcoming book, thanks to several research fellowships.
Feeling that I had done everything I could have dreamed of within the university system, I was eager to participate in the art market I had previously studied as an academic. This transition has been incredibly fulfilling, growing naturally out of my past research and areas of interest.
To answer your question about what art advisors do and how they work with clients, the specifics vary depending on the individual client-advisor relationship. In general, art advisors recommend and source acquisitions that are an appropriate fit for the collector’s portfolio and budget.
In my view, an advisor should be more than just someone with access to works. They should have the innate ability to guide collectors in crafting a distinct ethos for their collections.
In your analysis of the Art Basel & UBS Art Market Report 2024, you mentioned that the report paints a more optimistic picture of the art market than reality suggests. How does using nominal rather than real financial figures affect the assessment?
Related to that, it is often said that the art market has consistently outperformed the S&P 500 over the past several decades, making it an attractive investment opportunity. However, given the highly illiquid nature of art as an asset class, what are the challenges in accurately valuing the art market?
I’m glad you’re asking about this important subject, especially now that there are numerous art investment products on the market using these claims about art outperforming the S&P 500 in their marketing tactics.
In short, one can make a case that art has outperformed the S&P 500 as an investment over the past 20 years, but it requires massaging the data in such a way that only the top 100 contemporary artists are taken into account.
It also generally requires ignoring the fees associated with purchasing, storing, and insuring art. While there are certainly many ways to make money in the art market, and I believe it deserves a significant place in high-net-worth (HNW) and ultra-high-net-worth (UHNW) portfolios, the comparison with the equities market can be quite misleading.
Art is not a passive investment. There’s no art index that retail investors can buy into that would be comparable to the S&P 500 or the NASDAQ. While there are several art funds available, these are highly active in their management style and are only accessible to accredited investors and institutions.
As you mention, art is also highly illiquid, and the vast majority of it has little to no resale potential. For these reasons and a few others, I would not encourage thinking of an art purchase as analogous to investing in an index, and I don’t think that it should be viewed as having the same utility for the financial planning of retail portfolios.
Masterworks has done an excellent job bringing new art investment products to market and should be commended for their contribution. However, investors must be fully aware that the risk profile of a single painting isn’t comparable to 500 companies that index the U.S. economy.
As for the Art Basel & UBS Art Market Report 2024, I think very highly of the report, and it serves an important role in the art ecosystem. It’s effectively the go-to source for art market data from the previous calendar year. The report’s data is accurate, reliable, and well-presented. I personally use it, and I know many other art professionals who do as well.
That said, it is a report about the art industry, coming from within that very industry. So it’s incentivized to make the art market look as good as it possibly can, which is why it chooses to use nominal rather than real financial figures.
As I point out in my article, the nominal figures already show that the global turnover of art hasn’t grown in over a decade. If the report were to present the real financial figures that account for inflation, it would be readily apparent to its readers that the market is actually contracting.
That’s clearly not a good sign for the industry. Rather than just coming out and stating the obvious, the report opts for a more comforting narrative about how the art market has “recovered” from the COVID-19 pandemic.
While I can’t fault the report for its industry-friendly slant, I make sure to point this out to my clients and readers so that art buyers understand the growth trajectory of the market in which they are participating. Having this knowledge helps to set realistic expectations.
It’s also one of the reasons I’m consistently excited about NFTs – the sector is actually growing.
NFTs have had a fascinating journey over the past few years. Initially, they were the subject of immense hype, with prices reaching astronomical levels. However, NFTs seemed to have lost momentum after the crypto market crash. Did the crash signal the end of NFTs, or have they persisted in the art world? Looking ahead, where do you see NFTs heading in the coming years? What role do you think they will play in the art market?
I track the NFT market very closely, and it goes without saying that it’s been a tough couple of years as the market has corrected very sharply – some might even say “crashed” – from the highs in 2022. However, the land of cryptocurrency is one of boom and busts, and this is effectively par for the course.
The market is in the early stages of what I expect to be a logarithmic uptrend. I would be shocked if this turned out to be the end for NFTs. In fact, I’m very optimistic about them in both the near and long-term.
When it comes to the market structure of digital assets, I like to think about it this way. There are blue-chip assets with plenty of liquidity, infrastructure, and institutional support. Coming out of a bear market, these assets are generally the first to move higher. That’s why Bitcoin has outperformed altcoins as a whole up until now in this market cycle.
Later in the cycle, the assets that are further out on the risk curve tend to outperform. That’s because they appeal to investors when confidence is high and when profits have been made on safer investments.
Generally speaking, NFTs are about as far out on the risk curve as you can get. For this reason, I expect the NFT market to experience a wild upside move over the next 12-18 months.
On a fundamental level, the value proposition of NFTs for artists and collectors alike remains as strong as ever. They allow for art production, exhibition, and collection that is deterritorialized and de-materialized.
It’s an entirely new type of art market without entrenched intermediaries. It can also be accessed globally and permissionlessly. It’s truly remarkable when you think about it. Anyone who has shipped art across national borders knows just how much friction is involved. The same goes for art storage and insurance. NFTs solve for all of these issues which are at the core of the traditional art collector experience.
In the short to medium term, NFTs still have many obstacles to overcome in how they are perceived by traditional art collectors. Unfortunately, media coverage surrounding some of the most expensive NFT collections, many of which have no artistic merit whatsoever, has largely overshadowed the high-quality digital artworks that I see all the time.
For example, prominent artists like Marina Abramović, Paul Pfeiffer, and Trevor Paglen have all released NFTs over the past couple of years. There have also been some very commendable success stories in the space, most notably Art Blocks and its collaboration with Pace Gallery.
These developments have started to be recognized by art institutions, a trend that I believe will accelerate in the decades to come. For instance, in 2023, Centre Pompidou acquired a selection of NFTs for its permanent collection, including Jill Magid’s “Out-Game Flowers” by Artwrld and “Sentimente” by Agnieszka Kurant.
Tokenized digital art can intimidate institutions at first because it requires new methods of preservation and exhibition. However, with time, I am confident that we will see an increasing number of NFTs in permanent collections. The existence of a model that can be adopted makes the process easier. I would recommend that institutions look to the Akeroyd Collection for a simple but effective template for transparently exhibiting the holdings of an NFT collection online.
I will also predict that in the coming years an increasing number of superstar artists will follow in the footsteps of Damian Hirst by releasing NFTs. Blockchain presents a new avenue for building an artist’s community of collectors that is simply too powerful and lucrative to ignore.
For individuals unfamiliar with digital art, what are the main differences they should consider when analyzing digital art compared to traditional art? In traditional art, viewers often examine brushstrokes, medium, and artistic techniques. How do these aspects translate into the digital art world, and what specific elements should viewers focus on to better understand digital art?
That’s a great question, and my answer depends on whether this hypothetical person wants to analyze the market value of the work or its artistic value. When it comes to its artistic value, I would say that the key criteria are actually conceptual rather than purely aesthetic. That’s because the best works of digital art tend to engage with some kind of technological problem that intersects the medium of the NFT.
If an artwork doesn’t need to be digital, it probably shouldn’t be. The notion that NFTs are merely tokenized or digital versions of paintings isn’t very interesting. We’ve seen that idea put into practice by GODA with their Hilma af Klint NFT series, and I would say the whole endeavor was quite unconvincing. Af Klint intended for her works to be paintings, so copying them digitally and tokenizing those digital copies appears to be an attempt at turning a quick profit with little to no novel artistic contribution.
When it comes to analyzing the market value of digital art, the novelty of the NFT market presents certain challenges. In the traditional art market, there are fairly clear methods one can apply to gauge the price tier of contemporary artwork, even if the artist’s work has not yet appeared at auction. This is a topic in and of itself, but in brief, it can be accomplished mainly by looking at the impact factor of an artist’s gallery representation.
However, in the world of NFTs, works are habitually sold without a gallery exhibition, and most successful digital artists don’t have any gallery representation whatsoever. There are some Web3 art initiatives that function somewhat analogously to the gallery system – platforms like Feral File and Liveart – in that they will curate collections for sale and act as focal points where collectors can encounter artworks of a certain minimum quality. That said, the fair or expected value of an NFT cannot be calculated based on its association with any of these platforms.
To make matters even more complicated, many of the most popular NFT artists are completely independent from the gallery system. Artists like XCopy and Beeple have legions of enthusiastic fans who are deeply immersed in Web3 culture, and their works can sell for millions of dollars.
Without the traditional art world apparatus to encourage institutional recognition of their works, I am curious to see how the market for this category of “Web3-native artist” will hold up in the years to come. The market performance of this category of artists will likely answer the burning question as to whether or not the Web3 ecosystem can sustain an art market that is economically and culturally autonomous from the traditional art world or whether one will incorporate the other.
Either way, I think tokenized digital art has a very exciting and fertile future.
Bio: Adam Szymanski, PhD is an art advisor based in Berlin. More information can be found on his website: www.adamszymanski.art
Great article, Alina! I would agree about tokenized digital art!