1/ I've been speaking on this in a few Spaces lately, but I wanted to organize my thoughts around the 1/1 art market in a little 🧵.
Conclusion is I'm bullish (duh), but my outlook is long-term - prob years, not months. Here are a few reasons and what work remains to be done👇
2/ First off, let me just say I think we are on the front end of a digital art renaissance. Perhaps not since the 16th century Italian renaissance when canvas was popularized, have we seen such a dramatic shift in artistic medium.
3/ But my thesis revolves around just 4 major points:
1. Size of the art market dwarfs that of NFT's (by a lot)
2. NFT art has serious advantages over physical art
3. Long-term investment outlook provides stability
4. Operational costs are low
4/ Market Size: Most of us see the 1/1 market today and scoff at it. Secondary sales are dry, flips are few and far between, and beautiful artwork goes for 5% of a cat smoking crack (no fud, I have a cet 😅). But that dismissive outlook is missing a few important pieces...
5/ You see, the current onboard path for 1/1 art buyers is through gen NFTs. After 1-2 months of flipping pfps, you have a little extra coin and decide you want to buy art to become cultured and better than your degen friends kek. But right now, that % of traders is still v smol.
6/ So we try to find ways to bring more of these degens into 1/1's. We create art DAOs to provide low risk market access and education, build 100 piece 1/1 projects that can be used as pfps, or create 🔥 deriv art of our fave projects to bring the sol. These are all great things!
7/ This is a great target market in the short term. No need to educate on blockchain tech, wallet set up, buying crypto, etc. But when you zoom out, it pales in comparison to the real prize, the IRL art collectors.
8/ To illustrate, the last 30d volume on @MagicEden was about $265MM or $3.2B annual. Not bad, right? But this is traded volume - how much do you think is actual new money being dropped in? Maybe 20%? Now we're at $640MM annual. The IRL art market is $60-70 BILLION - 100x bigger!
9/ Of course, not all of that IRL money will come to Solana or even web3, but if you assume you can grab 30% of it in web3 and Solana gets 40% of that (there are obvious advantages to Sol for artists that I think make it a share leader long-term), we're still talking $8B.
10/ And that $8B is different than traded volume. That's just what collectors spend on IRL art (v little is traded). Imagine what the blockchain enables though - frictionless art trading. If that $8B trades hands just a few times over the course of the year, now we're talkin'...
11/ That brings me to my next point: on-chain art vs. analog art. The obvious advantage is ease of trading. Now art can be an actual (somewhat) liquid asset vs. just a store of value. The blockchain provides security and seamlessness. This will attract more capital.
12/ The 2nd pro of on-chain art is the royalty. It's no longer just the primary sale that benefits the artist. 2ndary sales can provide real income and that will motivate artists to move on-chain. So the blockchain provides benefits to both sides of the market - causing pull.
13/ Another bullish sign for me is the relative stability we've seen in recent weeks on the 1/1 side. Just last week we saw @CourtOfThForest hit a high of ~190s and an avg of 112s across 3 pieces. @archmorley went for 110 over the wknd and @iamlaurael bagged 178 yesterday.
14/ Let's take a look at @exchgART volume vs. @MagicEden over the last few weeks. Below is the ME chart and you see a pretty significant decline in early May as the market went south. On the other hand, Exchange Art volume has shown growth during this same period.
15/ My hypothesis here is that because 1/1 isn’t a flippers market, you have a long-term mindset when purchasing. Therefore, the turbulence in the market doesn’t have as big of an effect on the SOL prices of art.
16/ Ok so we’ve talked the revenue side, but often something overlooked by NFT investors is the cost side of the profit equation. What I love about 1/1 is the extremely low cost of operation. There (usually) is just an artist. No devs, no comms managers, no team to pay.
17/ So that means artists are better able to weather these downturns without worrying so much about their burn rate. I’ve seen the artist community flourish the last few weeks with a ton of new work, amazing experimentation, and overall positivity.
18/ Ok so if all of these tailwinds exist, why isn’t the 1/1 market seeing exponential growth? Well, it seems pretty obvious. To attract more degens, we need to pump secondary sales to show there is a quick(ish) investment opportunity.
19/ This is slowly happening. @degenpoet just sold out a collection yesterday in minutes and has seen secondary sales for 4x-8x. We also saw fomo this past Friday for @laurence_antony's Masked Warrior series with several going for 10+ sol when he still has ~70 more masks to drop.
20/ But the bigger hurdle comes with IRL collectors. The onboarding process to crypto will take some time. Most of these collectors are older and not tech savvy or risky.
21/ IMO, this will take years to onboard meaningful volume but it is starting. @exchgART having their first IRL gallery event in Miami a few weeks ago shows me that they understand the awareness and education that needs to happen. twitter.com/exchgART/status/1523330443466182658?s=20&t=_bCY4TC1uo9FGYeV1crGGg
22/ And we need digital displays that can portray fine art in a way that mimics physical art. Ppl want art they can display at home. I think we’ll see some big strides in frame tech in the coming years to help solve. Artists that include physical works may see more growth.
23/ TL;DR - my bull case is this:
1. The art mrkt is WAY bigger than the gen NFT mrkt
2. On-chain art has pros for both artists & collectors, creating pull
3. Art market has stability since investor outlook is long
4. Op costs for artists are low so they can weather the storms
24/ So welcome to the digital art renaissance. The real gains will take years, but my goal is to keep building my collection. Placing bets on different artists and just waiting. And hell, even if I'm wrong and it all goes to zero, at least I have some beautiful art to enjoy.