Art advisory & financing
March 17, 2022
3 mins

Global Art Market Disruption: Pushing the boundaries

March 17, 2022
3 mins
Citi GPS: Global Perspectives & Solutions
SUMMARY

It’s been another year of progress for the global art industry, with the emergence of NFTs and traditional art prices continuing to rise. A new Citi GPS report explores these developments and considers what might follow.


The COVID-19 pandemic has been a catalyst for rapid change in the global art market.

In response to the worst public health crisis in more than a century, the industry adeptly embraced digitization.

As we discussed in this 2020 Citi Global Perspectives and Solutions (GPS) report, leading auction houses successfully conducted online auctions, while art fairs wowed attendees with exciting new virtual experiences.

This broad-based adaptation was all the more impressive considering that the industry had previously been behind the curve in its deployment of new technology.

As pricing has become more transparent and the user experience more convenient, we have seen an influx of millennials, for whom buying online is second nature.

Transforming and adapting

Over a year later, the art industry continues to transform and adapt.

Thanks to digitization, a wider and more diverse range of people than ever before now has access to the market.

In turn, this has created a stronger focus on diverse artists and genres, and on artists who work outside mainstream platforms. We expect this to continue in 2022 and beyond, along with new synergies between auction houses, galleries, artists, and collectors, as well as sustained growth in private sales.

 

If 2022 is anything like 2021, we can expect the art market to grow and evolve further and faster.

 
Suzanne Gyorgy
Global Head of Art Advisory & Finance, Citi Private Bank

NFTs —disruptor and catalyst for change

The biggest change in 2021 was the rise of non-fungible tokens, or NFTs.

 
 
 
Elizabeth Howcroft, “NFT Sales Hit $25 Billion in 2021, But Growth Shows Signs of Slowing,” Reuters, January 11, 2022.
 

While almost non-existent in 2020, the market for NFTs generated sales of almost $25 billion in 2021 and then $7.4 billion in January 2022 alone.1

NFTs are not only a new way to consume art and collectibles, but are disrupting the traditional art ownership model.

This disruption is catalyzing change for both the artists and traditional distributors of art.

It allows the former to monetize their work and talent equitably.

 
 
 
Price indicated includes auction house premiums. Kelly Crow, “The Art Market Surges, Selling $2.3 Billion in Works”, The Wall Street Journal, November 19, 2021; Lindsay Dewar, “Marquee Evening Sales”, ArtTactic, New York, November 2021.   

For the latter – including auction houses and galleries – it has meant business growth, thanks to their nimbleness in embracing the phenomenon.

Ultimately, the rise of NFTs has helped drive an increase in overall art sales, with $2.3 billion of art sold in just a two-week span at the November 2021 auctions.2

Art’s investment performance

The strength of the art market throughout the COVID-19 pandemic is also reflected in the performance of certain major art indices.

 
 
 
Source: Art represented by the Masterworks.io All Art, Postwar and Contemporary Art, and Impressionist & Modern Art pricing indices; All data estimated in U.S. dollars covering period from end-December 2019 to end-June 2021. Other asset class returns estimated by the Global Asset Allocation team, Citi Private Bank. Past price performance is no guarantee of future price performance. © 2022 Masterworks.io LLC; All rights reserved. Indices revised as of November 2021.

From January 2020 through June 2021, the Masterworks.io All Art Pricing Index delivered a 28.2% .3

That’s comparable to broad, publicly traded risk asset classes including developed market equities, emerging market equities, and commodities.

Broad shifts in real interest rates from negative to deeply negative, helped by stimulus and central bank asset purchases, contributed to performance.4

What’s next for art?

Regulation has been and will continue to be a feature of the art market for the foreseeable future.

There are still some teething troubles for the NFT market, for example, with issues surrounding trademark infringement, security regulations, and the potential for fraud and abuse.

But it is not just the digital art market raising concerns among regulators.

Lawmakers around the globe have started to implement new laws and regulations requiring certain art market participants to help prevent and detect money laundering in their operations.5

With single NFTs regularly selling above the million-dollar threshold, a question also exists about whether the NFT market can sustain its current levels.6

However, as noted by Anders Petterson, Founder and Managing Director of ArtTactic, Bursting bubbles rarely signal the end, but rather the beginning of a new development phase.

Insights

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1Elizabeth Howcroft, “NFT Sales Hit $25 Billion in 2021, But Growth Shows Signs of Slowing,” Reuters, January 11, 2022.

2Price indicated includes auction house premiums. Kelly Crow, “The Art Market Surges, Selling $2.3 Billion in Works”, The Wall Street Journal, November 19, 2021; Lindsay Dewar, “Marquee Evening Sales”, ArtTactic, New York, November 2021.   

3Source: Art represented by the Masterworks.io All Art, Postwar and Contemporary Art, and Impressionist & Modern Art pricing indices; All data estimated in U.S. dollars covering period from end-December 2019 to end-June 2021. Other asset class returns estimated by the Global Asset Allocation team, Citi Private Bank. Past price performance is no guarantee of future price performance. © 2022 Masterworks.io LLC; All rights reserved. Indices revised as of November 2021.

4Source: Bloomberg, as of January 1, 2022. Past performance is no guarantee of future returns.

5Source: Citi GPS report Global Art Market Disruption: Pushing the boundaries, February 2022, Birgit Kurtz Attorney at Law (NY and NJ)

6Hiscox, Hiscox Online Art Trade Report 2021, October 2021.