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HomeNFT NewsNFT photos are the funhouse mirror art high-end art deserves

NFT photos are the funhouse mirror art high-end art deserves

The funny thing about many insane things that happen in the world is that they make sense from a certain perspective. For example, take the purchase of metaverse real property by famous brands. It seems absurd at first. It’s almost like purchasing an advertisement banner on a website. However, this assumes that the user base for the respective projects increases over time. The purchase is sensible considering the headlines that you get.

It is possible to make the exact same argument for nonfungible coin (NFT ) Art), another big trend in the blockchain space. Paris Hilton and Jimmy Fallon were just a few months back when they showcased the Bored Apes ., a show that showed how far the cringe abyss can go on live TV. These are just a handful of mainstream celebrities who joined NFT art hype train in recent months. Several of them were managed by United Talent Agency. You’d be surprised to know that UTA also .represents Yuga Labs Bored Ape Yacht Club.

Welcome to the club, @guyoseary !

— Bored Ape Yacht Club (@BoredApeYC) October 12, 2021

This may suggest a fascinating nexus among the entertainment elites as well as the NFT poster children. BAYC has more to offer than just pictures, but this is not always true for NFTs that are popping up at Sotheby’s and Christie’s. These two worlds are becoming closer together, and their similarities become more apparent. They also reveal some interesting truths about how we value art and value.

Related: Planet of the Bored Apes: BAYC’s success morphs into ecosystem

Value is in the eye of the appraiser

Traditional art is quite effective as a store of value; it can generate some returns over time and is pretty convenient in the sense that a $100-million painting takes less space than the same amount in cash. But if the value of fiat comes from the financial strength of the issuing nation, with art, things are 100 times murkier. What is art? After a visit to a random gallery of modern art, you would think that it could be anything. Some of the most prominent and modern artists, such as Andy Warhol and Jeff Koons work to dissect our notions of art and what it can be. If anything, we live in an age when a banana taped to a wall can be on display in an art gallery, valued at $120,000. It was eaten by someone who called it an artistic expression. But, the fruit was quickly replaced and business resumed as usual.

From this banana switcheroo we can infer that the fruit was technically fungible as long as this piece of duct tape went. The value of the art piece was not derived from one banana but rather from all bananas being held in place with a piece of duct tape. So, what exactly made for the $120,000 price tag? It all depends on the artist’s reputation, the gallery’s prestige, and other factors.

Related: Plain talk about NFTs: What they have been and what they are becoming

Things get even funnier when we try to apply the same logic to other valuable pieces of art. The Black Square, one of the most famous paintings by Kazimir Malevich, changed hands for $60 million in 2008. The painting is exactly what you’d expect — a literal square. It has no aesthetic value and therefore, it is not worth the money. To verify the authenticity of the painting, we would have to do a detailed analysis of its components, paint, and canvas. This will allow us to determine if they are authentic and if they are typical for Malevich’s time and locale. However, if someone were ever to grab this artwork and eat it, we wouldn’t be able replace it with another square of black, even though its aesthetic value would be greater. This piece’s value is determined by the person who drew it. Anyone other than Malevich will not be able to do so.

This is not to say that art valuation is entirely subjective (Malevich is Malevich, after all), and yet collective subjectivity manifesting itself in changing trends and fashions underpins it to the point of being pretty much inescapable. This is combined with the amount of money people will pay for quasi-ephemeral goods. Add some centralization and insiderism and you have a recipe that would be impossible in any other industry.

The shady underbelly

While many would probably want to believe in Cinderella-style tales of a starving artist whose star one day takes off, the reality is different. At the core of the art world, as a massive study revealed in 2018, is a network of about 400 venues, mostly located in the United States and Europe. You can give your muse a high five if you are lucky enough to be on a show at one of these venues. Things could get very difficult if you don’t. Your success, as measured by the value of your works, depends on how you attract the attention of the right dealers and critics as well as publicists and curators. This is a small but important group.

The flip side to this coin is the wide range of financial tricks that wealthy individuals can pull off through the art market. This is especially true if they are in the right place. Thanks to its openness to anonymity and intermediaries and affinity for big piles of cash, art is a great way to launder dirty money. Although major auction houses conduct due diligence checks, they are not always mandatory. The complex ownership structures also make it easier for criminal money to enter the market.

Art also works miracles for those in the business of bribery without raising too many red flags. Imagine a businessman looking for a tender and approaching the official responsible for the tender to request that the very cool porcelain vase be put up for auction. The vase would sell for a substantial sum at the auction, which is a lot more than its initial value. Who would buy it and who would get the tender? It was you who said it.

Besides all that, art makes for a neat financial instrument for things that aren’t even illegal. Tax write-offs through art donations are very much a thing: Snatch a few works of a soon-to-be star for $1,000, invest $500,000 into the network to amp up their valuation to $10 million, generously donate them to a museum, and there you go — no taxes on that much of your income. This is still an oversimplification — things can get even more interesting.

Related: Laundering via digital pictures? A new twist in the regulatory discussion around NFTs

Monkeying around

High-value art represents a relatively small portion of the overall industry: Just below 20% of art sales in 2020 saw price tags over $50,000. Similar trends are now evident in the NFT art market. While top collections can generate millions of dollars in secondary sales, most trades are small. These figures support the notion that many thousand of investors are investing millions in irrational investments.

NFT art attempts to duplicate the mechanism of high-end, traditional art by creating artificial scarcity. It is a better question to ask if they can be used as a store value. This is difficult because of the intrinsic subjectivity artistic value. An NFT can be described as a token that contains a link to a photograph in its metadata. But does that mean anything in a world where a fungible banana can cost $120,000?

One could argue it actually still does, looking at the fate of the NFT for Jack Dorsey’s first tweet, once auctioned off for $2.9 million and then received a bid for just $280. In just a year, the token’s value in the eyes of the market plummeted by 99% — a reflection of the changing trends and perceptions in the crypto community and the current state of the crypto market, which naturally affects NFTs’ capability to store value.

Still, the genesis tweet NFT could still have changed hands at $50 million had a single collector with enough Ether (ETH) to go around decided that the token is indeed worth such a price. Bored Apes still trade at a price of hundreds of thousands of dollars. There are indications that the market may be in decline. There are signs that the market is in decline, but why should it? The entire crypto market has fallen.

A key feature that makes high-end art useful for shadowy businesses — its often arbitrary valuation — is also in play with NFTs. NFTs are a new form of high-end art. The question is whether NFTs can offer the same legal flexibility and financial flexibility as traditional, commodified art.

A Chainalysis report points out that money laundering accounts for a small share of NFT trading activity, even despite a recent spike. Money laundering is the use of crypto to scam or hack NFTs. This seems a little narrow, considering the backstage activities in traditional art markets. What matters is how and whether the NFT scene develops an engine that infuses art with value. This is similar to what museums, galleries, and auction houses do. The traditional art institutions could also be part of this shift, as can the above-mentioned star-spangled shenanigans.

Related: Chainalysis report finds most NFT wash traders unprofitable

On the other end of this equation are, well, the end-users, for lack of a better word, and all of the off-chain legal intricacies. Let’s look at taxes, for instance. Capital gains tax is payable when you sell an art piece that you have in your collection. Same applies to selling an NFT.

With traditional art, though, you can avoid paying this tax with a neat trick. Your treasures can be kept in high-security warehouses at one of the many world’s freeports. They can stay there for decades without changing their location. The taxman does not need to be contacted about transactions as long as the art is there.

NFTs are available on-chain. Any transaction that moves its ownership to a new wallet will be visible to anyone, including the U.S. Internal Revenue Service. Hypothetically, there may still be some tricks to use, even with freeports. Imagine you have a cold wallet containing a lot of NFTs. You keep these tokens in a freeport even though they are still on-chain. When it is time to sell them, the device can be sold without any on-chain transactions. It makes sense, right? It all depends on what the return on investment each party gets.

This leads us to an ironic conclusion: In a world where art is a speculative asset, the future of NFT art depends not on its artistic value but on its properties as a financial instrument. You can get a tax reduction by purchasing a cheap NFT and increasing its value through some wash trades. In other words, you could trade it between your wallets to increase its value, then donate it to a museum. You might consider temporarily locking your NFT into an electronic protocol by staking it. To get tax relief, you might be able to stake your NFT into a museum’s bank account. You can fake a NFT theft by simply bouncing it into your other wallet to claim capital loss tax. It would make sense to purchase an NFT directly from the person in charge of that juicy, juicy tender or if they have a cool vase that works better.

These are great questions. If you are able to afford lawyers to help you avoid taxation, you might already be looking into it. The NFT art market for everyone else is a way to support their favorite creators. This is a different motivation than getting rich quick. It is a race to find the next big thing. Judging by the cool-offs and dominance of top collections, this market may be the only place that has anything more than a venue for supporting your favorite creators.

This article does not contain investment advice or recommendations. Each investment and trade involves risk. Readers should do their own research before making any decisions.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Denis Khoronenko is a publicist, fiction writer and content editor at ReBlode PR agency.

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Henry Hicks
Henry Hicks
NFT and Crypto Enthusiast. Loves Travelling and Exploring the Metaverse!


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