One of the central questions about NFTs has been whether their disruptive technology and ethos of democratization would lead to more equitable results than in the legacy art market. Well, a rigorous study of the major NFT platform Foundation mostly answers with a resounding, “Nope, not really.”

Published in the journal Scientific Reports, the research was conducted by Barabási Lab, a team of artists and data scientists studying complex networks. The co-authors used publicly accessible blockchain records to map every transaction that took place on Foundation during its first five months post-launch.

What emerged was an empirical recipe for market success as a crypto artist, which I parsed at length in this week’s Gray Market. Below is a summary of its five key ingredients. Most will taste very familiar to art-market veterans…

1. It Pays to Be First—and It Keeps Paying

Barabási found a clear and lasting “first-mover advantage” for crypto artists on Foundation. Artists who joined earlier sold more NFTs on average, and at a higher average price per NFT, compared to their counterparts who arrived later—no matter what “earlier” and “later” meant specifically.

The “initial adopters”—the first 2.5 percent of artists to join Foundation, between January 21 and February 22—out-earned the “early majority” artists—the 13.5 percent who joined between February 23 and March 10. But the early majority, in turn, also out-earned the later “majority,” who in turn out-earned the “laggards,” the final 16 percent of artists to join during the sample period.

Sell-through rate and median selling price followed the same step-by-step descent. The former gradually dropped from 74 percent in the initial-adopter phase, all the way to 13 percent in the laggard phase. The latter declined from $1,046 per initial-adopter NFT, all the way to $688 per laggard NFT.

2. It’s Better to Be ‘Foundation Famous’ Than ‘Twitter Famous’

Like Twitter or Instagram, Foundation allows users to follow artists on its platform to get notifications about their activity, including new NFT drops. Yet Foundation is only a niche within a niche of the crypto space compared to Twitter itself, which has become the headquarters of crypto enthusiasts in general and crypto artists in particular.

But the data reinforces the adage that “niches get riches.” An artist’s online presence elsewhere is nice. But unless they can port it over to Foundation, their success on the platform will be limited.

Artists who increased from 100 Foundation followers to 1,000 Foundation followers were likely to experience a 10X increase in earnings—a windfall only achievable if they increased from 100 Twitter followers to 10,000 Twitter followers (i.e. an order of magnitude more.)

3. It’s Still About Who You Know

As an “open” platform, Foundation allows artists who have already joined to invite new artists on board. But while this democratization of opportunity gels with the crypto discourse, sales results indicate that success is largely predetermined by artists’ relationships.

Since every Foundation artist’s profile page includes an “invited by” tag, Barabási and his team were able to map each of the 640 “artist clusters” that sprouted on the platform in its first five months.

Data showed that some artist clusters dramatically outperformed others—and that new artists fared about as well (or as poorly) as whoever invited them. The “richest” and “poorest” clusters consistently did much better (or worse) than a randomized reference cluster in terms of sales value, sales volume, average selling price, and follower counts on Foundation and Twitter.

4. It’s Very Hard to Shake Your Initial Reputation

Artists are responsible for setting their own prices on Foundation. Even if a new work fails to attract bids at its initial asking price, the artist can re-list it at a lower price. (Foundation allows works to be offered for private sale or public auction; in the latter case, a 24-hour countdown clock begins when a bidder agrees to meet the listed reserve price.)

Data shows that this system hybridizes a truly free market and the price-controlled gallery sector: artist’s selling prices often varied significantly from NFT to NFT—but also tended to stay within a stable range defined by their starting reputation level. 

The study found that reputation has a similar impact on work-to-work selling price, mean selling price, sales volume, maximum earnings, and more—all of which mutually reinforce. Call it crypto predestination, with artists’ odds of success mostly locked in before they mint their first NFT.

5. Even as NFTs Drew in the Masses, the Rich Still Ruled

Although data showed high-reputation artists attracting new bidders at twice the rate of medium- and low-reputation artists, the three groups attracted new buyers at an “indistinguishable” rate.

This means NFTs by high-reputation artists tend to be acquired over and over again by a few passionate collectors, often at outsize prices driven up by broader bidding. In other words…

The minority of works acquired by top collectors sold for vastly more than the majority of works acquired by everyone else—both market-wide, and among individual star artists. 

Of 2,743 NFTs sold by the 180 highest-earning artists, about one-third were purchased by collectors who had previously bought work by the same artist. The roughly $4.5 million spent by these repeat investors made up more than 76 percent of the cohort’s total sales value ($5.9 million).

The same relationship was visible at the single-artist level. Nearly 62 percent of the artist PaulSnijder’s earnings came from just six NFTs acquired by just three repeat collectors. Another 21 works, each purchased by a different buyer, made up the other 38.5 percent of their earnings.

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The Bottom Line

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Paint Drippings

Sotheby’s Oliver Barker with Shara Hughes, Naked Lady (2019). Courtesy Sotheby’s

In the latest Wet Paint, we learned that Sotheby’s paid TikTok influencer Gstaad Guy to build hype around its “The Now” sale in London last week. How? By crafting content faking that he won George Condo’s Green Head Composition (2013) for a cool £2.3 million ($3 million). Sotheby’s, however, confirmed that the painting went to a buyer in Southeast Asia.

Also, an apparent mass exodus of artists from the roster of Jack Hanley turns out not to have been a direct response to his new Beeple show after all. While emerging talent Emily Mullin did leave in protest, per Hanley, five other artists’ names disappeared from the gallery’s website for unrelated reasons, including compliance with the Americans With Disabilities Act (whose vagaries are being weaponized against dealers in a spree of lawsuits—yes, again).

Here’s what else made a mark around the industry since last Friday morning…

 

Art Fairs

• Sales at Art Genève were brisk despite Switzerland’s decision to impose sanctions on Russia, but the fair said it has indefinitely paused its plan to expand to Moscow. (Artnet News)
• The artistic director of the Cosmoscow fair, Simon Rees, resigned in protest of the invasion of Ukraine. He is now working for Lithuania’s Contemporary Art Center Vilnius while relocating and housing Ukrainian refugees in Vienna. (Artnet News)

 

Auction Houses

• The latest Hot Lots highlighted six works that upended expectations during last week’s London day sales, including an explosive auction debut by Antonia Showering that fetched £226,800 ($300,100)—more than 15X its upper estimate at Phillips. (Artnet News)
• Mega-collector Ken Griffin pulled out of a $100 million deal to buy René Magritte’s L’empire des lumières last year after an in-person viewing, per three sources with knowledge of the deal. The work sold at Sotheby’s London last week for a less spectacular (but still record-busting) $79.8 million. (The Canvas)
• Phillips‘s New Now sale in New York brought in $8.4 million across 195 lots on Wednesday, setting new records for Sarah Slappey, Sanford Biggers, and Jordy Kerwick, whose Untitled 7 shot to $201,600, more than 10X its high estimate. (Press release)

 

Galleries

• Gagosian is showing Francis Bacon‘s earliest “Pope” work at its London gallery on Davies Street from March 15 through April 23. The 1946 painting, which resurfaced in 2016 during the compilation of Bacon’s catalogue raisonné, has never been exhibited publicly. (Press release)
• Jonathas de Andrade, who will represent Brazil in the Venice Biennale, has left Vermelho gallery for Galeria Nara Roesler. De Andrade will still work with Alexander and Bonin in New York and Galleria Continua across its various locations. (Press release)
• The Robert Rauschenberg Foundation is partnering with three galleries—Thaddaeus Ropac in Salzburg, and Mnuchin and Gladstone galleries in New York—to stage a set of exhibitions focused on his less-known post-1970 works. (Artnet News)

 

Institutions

• Late collectors Norah and Norman Stone gifted SFMOMA 350 contemporary works (including pieces by Diane Arbus, Francis Picabia, and Carrie Mae Weems) and $10 million in unrestricted funds, which the museum will put towards future exhibitions. (Artnet News)
• More European institutions distanced themselves from Russia. Amsterdam’s Hermitage Museum and the Hermitage Foundation U.K. cut ties with their parent museum in Saint Petersburg (from which they regularly borrowed works); Belgium‘s AfricaMuseum suspended all contracts with Russian organizations, institutions, and researchers per Belgian federal policy. (Monopol / Press release)
• The Sackler family agreed to allow museums to remove its name from buildings and programs without penalty, as part of a new settlement that resolves multiple civil lawsuits filed in response to the opioid epidemic. (Artnet News)
• Budi Tek donated seven works from his Yuz Foundation to LACMA, led by Ai Weiwei’s oft-photographed “Zodiac” heads. (TAN)

 

NFTs and More

• NFT marketplace OpenSea has been deleting the accounts of Iranian users and collectors due to ongoing sanctions from the U.S. (ARTnews)
• Collector and Garage Museum cofounder Roman Abramovich is the latest UHNWI Russian national to be tagged with sanctions by the U.K., including a complete asset freeze that blocks his efforts to sell Premier League powerhouse Chelsea F.C. (Financial Times)
• The Getty Trust in Los Angeles is suing the financial-services firm Allianz over alleged mismanagement of its investment fund. The complaint accuses Allianz of losing some $60 million by abandoning its promised strategy to protect against a market crash. (Artnet News)

 

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Data Dip

Warhol’s Wild Auction Ride

© 2022 Artnet Worldwide Corporation.

Andy Warhol’s auction profile has taken some hits since the early 2010s. But while some insiders insist this perception is warped by his market’s yearslong shift toward private transactions, the fright-wigged one’s works may be regaining momentum under the gavel, too.

 

• Warhol’s total sales by value peaked in 2014, at $653.7 million worldwide, then promptly entered a multi-year decline.
• His auction market hit rock bottom during the pandemic in 2020, notching sales of just $116.5 million—a mere 18 percent of its apex value six years earlier.
• But bidders spent $347.6 million on Warhol lots last year, more than doubling his YOY sales, and making him 2021’s third-highest selling artist at auction (behind only Basquiat and Picasso).

 

For a more nuanced analysis of these twists and turns, click through below for the latest Artnet News Pro Appraisal.

 

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“His mother asked me to.”

 

—Thomas Krens on why he hired a 21-year-old Max Hollein as an intern while serving as director of the Guggenheim, sparking a decades-long mentorship that proved instrumental in Hollein’s eventual ascension to the director’s chair at the Met. (WSJ Magazine)

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Artwork of the Week

Pablo Picasso’s Tête de femme (Fernande)

Pablo Picasso, Tête de femme (Fernande) (1909). Courtesy of Christie’s Images, Ltd.

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Date:                    1909

Seller:                  The Met

Estimate:             $30 million
Selling at:            Christie’s New York
Sale Date:            May (date TBD)

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The latest trophy announced for May’s spring auction cycle is also one of the pricier works to be deaccessioned by a museum of late. The Met has officially consigned a bronze cast of Picasso’s 1909 Head of a Woman (Fernande), widely considered the artist’s first Cubist sculpture, to Christie’s. The work carries a $30 million estimate and a house guarantee.

It is also the definition of expendable for the Met, since the museum owns not one but two of the work’s roughly 20 known casts. The sculpture earmarked for Christie’s was donated more than 35 years ago by Florene M. Schoenborn (who died only a few years later); its soon-to-be replacement is part of a Cubist trove promised to the Met by the still-kicking über-patron Leonard Lauder last year.

(The redundancy was a big part of the reason Katya reported six months ago that the Met was mulling a sale of the work, which the museum declined to confirm at the time.)

In a statement, the Met pledged that all sales proceeds will go toward new acquisitions. This seems kinda obvious, since the sale will take place a month after the closure of the ADAA’s pandemic-responsive window allowing member institutions to deaccession for the sake of collection care. But given how controversial deaccessioning can be, it probably doesn’t hurt to be clear!

The Met raises around $15 million from art sales in a typical year. If all goes as planned, its acquisition coffers will soon be about twice as full as usual. I guess flesh-and-blood plutocrats won’t be the only ones to come out of the pandemic richer and readier to spend.

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With contributions by Naomi Rea. 

 

Thanks for joining us in the Back Room. See you next Friday.