What Will Happen to NFT Artworks After the Bubble Bursts?

[Asia Economy Reporter Kang Nahum] Office worker A recently has been troubled by an NFT artwork he purchased. In early January, he bought an artwork on an overseas NFT marketplace for 1 ETH (1 Ethereum, approximately 4.7 million KRW at the time) and tried to resell it, but no buyers willing to pay his desired price have appeared. He set the selling price at 1.2 ETH (about 5.6 million KRW) and waited for a week, but the only offer currently on the bid board is 0.5 ETH (about 1.75 million KRW). If he sells at the bid price, he will incur a loss of 3 million KRW.

The enthusiasm for the NFT market centered on digital art is fading. As transaction growth slows, concerns are rising that the bubble may be bursting. In contrast, the physical art market is experiencing an unprecedented boom, showing a completely opposite trend to the NFT art market.

◆ NFT Transaction Volume Slows = According to NFT data research firm NonFungible on the 21st, the average transaction price of NFT artworks as of the previous day was $1,697, falling below $2,000. This is about one-tenth of the peak on January 2nd this year ($15,951). Foreign media analyze that the global easing policies are being relaxed and the U.S. Securities and Exchange Commission (SEC)'s intensified regulatory investigations on NFTs have also had an impact.

The high volatility of cryptocurrencies used as transaction means is also fueling the NFT bubble controversy. The price of Ethereum, mainly used in NFT transactions, has been declining since its peak in November last year (5.5 million KRW) and is currently trading around 3.5 million KRW. If one sells an artwork bought for 1 ETH in November now at 1 ETH, it would result in a loss of over 2 million KRW.

◆ Even Artists Say "NFT Bubble" = NFT artworks gained serious attention when the American digital artist Beeple's image collage work "Everydays: The First 5000 Days" was sold for $69.3 million (about 78.5 billion KRW) at Christie's auction last March. This 300MB JPEG file was the highest-priced digital artwork ever auctioned at Christie's. However, even Beeple expressed concerns about such price formation. In interviews with various foreign media, he warned, "NFTs are 100% a bubble, and buyers should be cautious."

Suspicion about the artistic value of NFT artworks is also cited as a factor in the decline of transactions. NFT investor B said, "Nowadays, in the NFT market, it is common to see a few characters drawn and listed for hundreds of thousands or millions of KRW," adding, "It feels like the intrinsic value of the artwork is ignored, relying solely on 'scarcity.'"

Legal protections such as copyright are also ambiguous. Under current Korean law, ownership is only recognized for tangible physical objects. A legal expert said, "Under current law, digital works like NFTs are not considered objects of ownership, so it is difficult to say ownership is transferred in typical NFT transactions," adding, "This means it is impossible to precisely specify what is being traded."

◆ MZ Generation Returns to Physical Art Auctions = As the NFT craze subsides, the physical art market is experiencing an unprecedented boom. With the emergence of art co-purchasing platforms lowering transaction barriers, it is gaining attention as a new investment method among the MZ generation. According to the '2021 Korean Art Market Report' by the Arts Management Support Center, the domestic art market, including auctions, galleries, and art fairs, was valued at 922.3 billion KRW, nearly 1 trillion KRW, a 2.8-fold increase from 329.1 billion KRW the previous year.

At the VIP opening of the Gallery Art Fair held at SETEC near Hakyeoul Station on the 16th, 3,850 visitors attended over five hours, setting a record for the highest number of visitors on the first day. Sales on the opening day reached 4.5 billion KRW, exceeding 60% of last year's five-day total sales of 7.2 billion KRW. At the solo exhibition of emerging Korean artist Cheongshin held at Print Bakery in Pyeongchang-dong on the 17th, dozens of people gathered even before the exhibition started. A remarkable scene unfolded where people pitched tents and waited from early morning to purchase the artist's paintings.

An industry insider said, "Physical artworks officially appraised by reputable institutions such as the Korean Fine Arts Association rarely lose value once their worth increases," adding, "Compared to NFT artworks, which show high price volatility depending on international situations, physical artworks inevitably have an advantage in terms of stability."