Art Investment Blockchain

The Likely Effect of Tokenisation on Art Markets

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Written by
Marc Garriga

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12 March 2019

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 Maecenas was founded on the simple premise that fine art as an asset class should be accessible to ordinary people.  The fact that it is not is a quirk of history. Nobody is shocked by retail investors buying gold ETFs or shares in a REIT.

 

There is no expectation that these people purchase and store whole bars of bullion, or amass vast sums of capital to buy an entire commercial building. And yet to invest in fine art - most of which sits in storage as it gains value - a buyer is expected to purchase the entire work.

 Maecenas is at its core a fintech company. This may seem hard to square; after all, we are passionate about art and about bringing great works to a broad audience. But art is first and foremost an alternative asset class, like precious metals or infrastructure. But these asset classes are basically liquid. For various historical - and technological - reasons, art has remained illiquid and opaque until now.

 This anomalous fact cuts ordinary investors out of a lucrative way to diversify and grow their investment portfolios. The Wall Street Journal found that luxury items, including fine art, were the best performing investments globally in 2018. Now, tokenisation offers the possibility of fractionalised ownership in fine art - a concept proven by Maecenas’s successful tokenisation and auctioning of a Warhol last year. So we wanted to take a moment to consider what effect tokenised, liquid art would have on investors and markets.

 Let’s first examine the implications of fine art becoming truly liquid for the first time. The effects of this would likely extend beyond the obvious fact of many more investors having access to the asset class. Tokenising artworks would almost certainly cause market velocity to accelerate significantly, since fractions of these assets would likely trade frequently. By contrast, an entire piece, with a total value of US$1m or more, is likely to change hands only very rarely. So tokenising art seems likely to have the knock-on effect of increasing trading volumes through both ease of trading and an increase in the number of participants in the market.

 What will this mean? From the standpoint of an individual newly granted entree into fine art, it means the opportunity to participate in the significant benefits art investment offers. The attractiveness of the space suggests that significant numbers of new participants will therefore enter the market. The effects of this increase are likely to include greater rationality and visibility into art trading, as higher liquidity will offer a much greater set of data points for market analysts. Much of the guesswork will be taken out of pricing artworks, and the asset class will behave - in its ability to be analysed and traded - more like other investments. Of course, we must not forget that the fundamental strengths of art as an investment will remain. They will simply have become more mature.

 

Article image: Claude Monet "Arrival of the Normandy Train, Gare Saint-Lazare" (1840-1926) via the Art Institute of Chicago.

Topics: Art Investment, Blockchain

Marc Garriga

Written by Marc Garriga

Marc has over 10 years of experience in Fortune 500 institutions as well as at start-ups across Spain and Singapore. Marc is a T-shaped marketer with extensive experience across sales, growth, product and project management with a strong focus on digital and tech products. Marc has been involved in blockchain projects since 2014.

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This blog post is illustrative and for informative and general education and discussion purposes only. It is not, and should not be regarded as “investment advice” or as a “recommendation” regarding a course of action, including without limitation as those terms are used in any applicable law or regulation. This information is provided with the understanding that with respect to the material provided herein (i) MAECENAS is not acting in a fiduciary or advisory capacity under any contract with you, or any applicable law or regulation, (ii) that you will make your own independent decision with respect to any course of action in connection herewith, as to whether such course of action is appropriate or proper based on your own judgment and your specific circumstances and objectives, (iii) that you are capable of understanding and assessing the merits of a course of action and evaluating investment risks independently.. MAECENAS does not purport to and does not, in any fashion, provide tax, accounting, actuarial, recordkeeping, legal, broker/dealer or any related services. You should consult your advisors with respect to these areas and any material with regards to investment decisions. You may not rely on the material contained herein. MAECENAS shall not have any liability for any damages of any kind whatsoever relating to this material. No part of this document may be reproduced in any manner, in whole or in part, without the written permission of MAECENAS except for your internal and/or personal use. This material is being provided to you at no cost and any fees paid by you to MAECENAS are solely general educational purposes. All of the foregoing statements apply regardless of (i) whether you now currently or may in the future become a user of MAECENAS’s platform or products and (ii) the terms contained in any applicable contract between you and MAECENAS.

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