Why Is NFT Art So Expensive? (6 Key Reasons, Priciest Artworks)
the idea that NFTs are universally expensive.
However, much like traditional art, NFT art prices can range from a few dollars to millions.
In fact the average price of an NFT in 2022 was only around $150.
That said there have been some noteworthy sales, with the most expensive NFT artwork selling for an astounding $69 million.
Let’s discover why NFT art is so expensive and the six most costly NFT artworks. We’ll also see why some investors are skeptical about this asset class and how you can invest in shares of physical blue chip art through Masterworks.
Why is NFT Art So Expensive? (6 Common Reasons)
Here are six prominent factors contributing to the price of NFT art:
1. Scarcity and Rarity
When you buy an NFT artwork, you aren’t just buying the image but also a permanent token etched on a blockchain unique to that specific digital asset.
Every time a creator mints an NFT artwork it allows them to limit its supply and this rarity tends to inflate its price.
Additionally, some non fungible tokens (NFTs) are specifically designed for collectibility.
The Bored Ape Yacht Club (BAYC) is an NFT project introduced as a limited collection. Bored Ape cannot submit new collectibles to the original Bored Ape NFT collection.
Interestingly, there’s no guarantee that any future Bored Ape NFT project will be as valuable as their original NFT collection.
2. The NFT Bubble
When investors rapidly buy assets to sell later at higher rates, it pushes up asset prices and creates a bubble.
Such economic bubbles occur whenever a new technology emerges, like blockchain. Blockchain in turn gave rise to non fungible tokens.
Celebrities and other prominent investors fuelled the hype around non fungible tokens. Some, like Lebron James and Paris Hilton, even released their own NFT collection.
Many people started investing in crypto art without fully understanding the asset, with buyers hoping to sell their NFTs quickly for profit and contributing to the NFT bubble.
When crypto winter hit in late 2021, the NFT bubble popped, leading to a decline in value for the assets. As a result, fewer people were looking to buy and investors struggled to sell their NFTs.
3. NFTs Can Be Used to Raise Funds
Occasionally, NFTs can fetch higher prices when they’re used to raise funds.
For example, one of the most expensive NFT sales occurred in 2022 when the Assange DAO (Decentralized Autonomous Organization) successfully sold Pak’s Clock NFT for 16,953 ETH (approximately $52.7 million at the time).
The proceeds from the sale went towards the legal defense of WikiLeaks founder Julian Assanges.
Similarly, the family of Ross Ulbricht, the creator of the dark web site Silkroad, released NFTs to raise funds for his legal defense. The debut NFT sold for $6.2 million in a SuperRare auction.
4. Connection with the Metaverse
Another reason NFTs are expensive is their connection to the Metaverse – a virtual world where people can create and consume various in-game items. In the Metaverse, individuals are represented as avatars and can even own digital space in the form of virtual real estate.
Although the specifics of digital asset ownership in the Metaverse remain unclear, it’s speculated that NFTs could be used as:
- In-game paintings on a virtual estate
- Features in virtual collections
- Player avatars, etc.
Currently, you can buy similar NFTs for online games like Axie Infinity, Dogami, and so on.
But as participation in the Metaverse increases, the demand for NFTs may also increase. This anticipated future demand motivates individuals to purchase NFTs and profit by selling them later.
5. Easy to Buy and Sell
The learning curve can be steep for trading most collectibles like baseball cards, antiques, or stamps. You’ll need to get the collectible item authenticated, confirm its condition, compare prices and market the item to get the best price.
Storage and delivery of the item will also require some knowledge and may be costly.
In contrast, NFTs are much easier to buy and sell.
To buy a non fungible token, you would have to:
- Visit an NFT marketplace like Nifty Gateway, NBA Top Shot, OpenSea or Rarible
- Review the items in the gallery, including the items’ metadata
- Check the creator’s credentials once you’ve found an NFT that interests you
- Make an offer and purchase the item
Anyone worldwide can buy and sell NFTs via the world wide web. This means more trading can occur, and more capital can enter the market, increasing the value.
6. Transparency and Ownership History
An NFT’s recorded ownership history can impact its value. While tracking a physical art work’s history may be difficult, tracking NFT artwork is much more straightforward.
Thanks to blockchain technology, monitoring ownership is simple as each sale is recorded on the blockchain.
Additionally, if an NFT was owned by a celebrity, it would further push up the price.
For example, in December 2021 Eminem bought an NFT and used the image as his Twitter profile picture. If he decides to sell it, the prices of this non fungible asset may skyrocket.
Next let’s explore the most expensive NFT artworks and see why they shattered records.
6 Most Expensive NFT Artworks & Why They Cost So Much
Here are the priciest NFT artworks ever sold:
1. Beeple, Everydays: The First 5000 Days ($69.3 million)
The most expensive NFT artwork was a collage sold at a 2021 Christie’s auction. This piece of digital art was created by NFT artist Beeple — whose real name is Mike Winkelmann. It was bought by NFT collector Vignesh Sundaresan, also known as MetaKovan.
Some speculated reasons why this artwork fetched such a high price:
- The artist grew a huge fan base (2.5 million) across social media channels.
- His work is prolific — he has published a new piece of digital art every day for 14 years.
- The NFT market grew rapidly in the months preceding the sale.
- The Christie’s auction added legitimacy to the artwork. The auction house is 255 years old and has sold some of the most famous pieces in history.
2. Julian Assange and Pak, Clock ($52.7 million)
Clock NFT sold for $52.7 million, making it the second most expensive NFT sale.
It was created by anonymous NFT artist Pak and sold by AssangeDAO, an organization fighting for the freedom of Julian Assange, the founder of Wikileaks. AssangeDAO consists of more than 10,000 Assange supporters who pooled their money to buy the NFT.
The single NFT shows a timer counting the days Assange spent in prison. The sales proceeds will be used to help fund Assange’s legal defense. He currently faces extradition to the US with a possible 175-year jail sentence.
The artwork sold for a staggering amount because the proceeds were used for what creators and potential buyers believed was a good cause.
3. Beeple, Human One ($28.9 million)
This generative NFT sculpture by the renowned digital artist, Beeple was sold in a November 2021 Christie’s auction.
The piece is a kinetic video sculpture with a corresponding dynamic NFT which continuously displays evolving artwork over time. The artist will have permanent remote access and creative control over the artwork.
The uniqueness of Human One, together with the reputation of the digital artist, contributed to its high price. Beeple’s NFTs are known to bring in record-breaking amounts.
4. CryptoPunk #5822 ($23.7 million)
CryptoPunks is a collection of non fungible tokens (NFTs) on the Ethereum blockchain launched in 2017 by Larva Labs Studio.
This particular CryptoPunk was bought by Deepak Thapliyal, CEO of a blockchain infrastructure startup called Chain. He purchased the iconic blue Alien Punk wearing a bandana in February for around $23.7 million.
Cryptopunks come in humanoid forms, with the rarest pieces being zombies, monkeys, and aliens. Alien cryptopunks are the most expensive because there are only nine of them in the collection of 10,000 pieces.
5. CryptoPunk #7523 ($15 million)
This CryptoPunk artwork was sold at a 2021 Sotheby’s NFT sale. The auction took place virtually via Decentraland — a blockchain-based virtual world that resembles Minecraft.
Like CryptoPunk #5822, the NFT features an Alien Punk, one of the rarest in the collection. It depicts the blue-green alien wearing a medical mask, an earring, and a knitted hat.
6. Tpunk #3442 ($10.5 million)
In August 2021, Justin Son, CEO of Tron, purchased this NFT artwork resembling a pixelated version of the Joker.
Interestingly, the same buyer also actively bid on Beeple’s Everydays: The First 5,000 Days but was outbid by $250,000.
We’ll answer your questions about NFT art next.
Other FAQs About NFT Art
Here are the answers to other questions you may have about NFT art:
1. How is NFT Art Commonly Created?
NFTs are commonly created by artists, musicians, gamers, and famous brands. Famous NFT creators include celebrities like Paris Hilton and Lindsay Lohan, as well as digital artists like Beeple, Art Blocks, Mad Dog Jones, etc.
But anyone can create an artwork and turn it into an NFT on the blockchain through a process called minting. You’ll have to do this on a platform like SuperRare, Ethereum, and others, which let you create NFTs using blockchain technology that can’t be altered.
Here’s how it works:
- Create an artwork you want to attach to a non fungible token (NFT).
- Choose the blockchain technology you want to use.
- Set up your digital crypto wallet if you don’t already have one.
- Decide which NFT marketplace you want to use to sell your NFT – OpenSea, Nifty Gateway, and SuperRare are some of the most common ones.
- Follow the instructions on your chosen marketplace to convert your digital artwork file into a marketable NFT.
- Decide on a price and follow the instructions on the marketplace to set up the sale process for the NFT.
Once the NFT is minted, you can put it up for sale on a marketplace and attach a commission you’ll receive when the NFT is sold.
Some marketplaces have also introduced lazy minting – a delayed minting process. With lazy minting, sellers only pay the minting fee after the NFT is sold.
2. How Can You Buy NFT Art?
Here are the steps to follow if you want to buy NFT art:
- Set up a crypto wallet to store and access the keys to your crypto art and assets.
- Connect your crypto wallet to the marketplace of your choice.
- Buy cryptocurrency, like Solana, Bitcoin, etc., for your crypto wallet. Some marketplaces like Ethereum blockchain accept credit cards as well.
- Browse the NFT artworks available and buy the one you want.
3. Can NFT Art be Plagiarized and Counterfeited?
It’s possible for the person who creates or inserts an NFT on the blockchain to not have the digital property copyright. If the real owner is unaware of any transactions, someone else will end up collecting profits from their property.
One incident involved the Hermès Metabirkin NFT collection of virtual bags, which the brand didn’t create. Mason Rothschild created and sold it for $24,000.
Hermès sued Rothschild for violation of trademark rights under the intellectual property code and won in February 2023.
Interestingly, counterfeits of Rothschild’s Metabirkin NFT bags have also been sold online for as much as $35,000.
It’s important to note that this type of problem is rare in the NFT space. Creators of NFTs have to submit an intellectual property certificate or proof of copyright for each NFT they submit to blockchains.
Pros and Cons of Investing in NFT Art
NFTs offer a convenient way for art investors to diversify their portfolios.
A non fungible asset is attractive since it cannot be duplicated, substituted, or subdivided. This is appealing from a property rights perspective because investors relish the exclusivity of owning a one-of-a-kind asset.
Another attractive aspect is the decentralized nature of NFTs. This allows the NFT collector to interact directly with the creator. Removing third-party involvement means creators can enjoy a larger share of the profits.
But it may not be for everyone.
Some investors are skeptical about NFT art:
- The market is unregulated: The NFT market is mostly unregulated, so investors should be warned of potential risks. Unprecedented legal issues may arise too, since the space is so new.
- Uncertainty around the future of NFTs: Unlike the physical art market, the NFT art market is relatively new. Market experts are watching the impact of technological advances and regulatory changes on the NFT market closely.
- Security concerns: NFTs are digital and are vulnerable to digital threats like viruses, glitches, upgrades, etc. Your digital wallet can also be hacked and the asset can be stolen.
Although NFT art investment may look potentially profitable, you must be cautious when diving into this type of investment.
If you’re keen to join the world of blue-chip art investment, you can always consider Masterworks.
Masterworks is a market-leading art investment platform making fine art investment accessible to a wider audience. Through this platform, anyone can invest in shares of masterpieces by legendary artists like Picasso, Basquiat, Banksy.
Their expert research and acquisition teams utilize proprietary data and art world expertise to curate a collection of iconic artworks.
Here’s how it works:
- The research team identifies the artist markets with the most potential.
- Based on their research, the acquisitions team locates the artwork and purchases it at what they believe is a fair price.
- Masterworks will file an offering with the Securities and Exchange Commission (SEC) to securitize the artwork.
- Typically, they hold a piece for 3 to 10 years. If it’s sold for a profit, you’ll receive your pro rata returns minus fees.
- Alternatively, you can sell your shares on the secondary market.
If you’re ready to invest or want to know more, check out Masterworks.
See important Reg A disclosures: masterworks.com/cd