The NFT art market faces uncertain prospects in 2023. On the one hand, the market is showing signs of recovery after last year’s challenging “crypto winter,” with NFT trade volume in January 2023 the highest since June 2022, according to the Dapp Industry Report.
On the other hand, investor enthusiasm for the NFT sector seems to be fading and the convergence between finance and art means that the investment cycle is shortening. Last year, the crash of the NFT market prompted investors to look for the next big thing, such as AI-generated artwork or chatbots like ChatGPT.
In addition, the recent sudden collapse of Silicon Valley Bank affected some noteworthy cryptocurrency firms, including Yuga Labs, the company behind the NFT IP Bored Ape Yacht Club. Although the wider impact is likely limited since U.S. banking regulators said they would insure all deposits from the failed bank, crypto investors are becoming — and probably will remain — more risk-averse and will put a higher value on liquidity, which could further shorten the NFT investment cycle.
It is in the midst of this fluid situation that major art institutions are again asserting their leading role in the digital art market, which is to say the NFT market. Recent acquisitions of dozens of NFTs by the Los Angeles County Museum of Art (LACMA) and the Paris-based Centre Pompidou indicate that some respected institutions are eager to document the history of crypto art. In the case of the latter, the acquisition was supported by the French Ministry of Culture.
The involvement of art institutions will help the NFT art marketplace return to its original function of supporting a new form of artistic expression in the age of Web3. While the current hype for all things AI-related has put discussions of Web3, the metaverse, and NFTs on the back burner, it has also helped calm an arguably overheated Web3 market, with current and upcoming rhetoric likely to focus less on investment opportunities and more on the quality and meaning of art.
Meanwhile, if galleries or museums are able to assert dominance and a driving role in the market, independent artists will likely play a smaller role in this supposedly decentralized system. However, as the public is questioning the legitimacy of NFTs and cryptocurrencies, perhaps the leadership role of trustworthy art institutions is necessary for crypto art’s long-term success.