Why we spent over $2 million on digital art
Dear Bankless Nation,
We told you the NFT space was going to get big—more artists, more buyers, more money. And it’s happening.
These guys put their money where their mouth is. They spent two days, sleepless nights, a lot of mindshare and $2.2 million dollars on digital art.
You might be wondering…Ryan why would anyone drop millions of dollars on digital art. They have to be crazy.
This was fully intentional. The artist was Beeple, a well-known creator in the digital art world. He’s worked with major brands like Apple, SpaceX, Justin Bieber.
He’s also built up a following of 1.7M people.
This was a calculated move. A bet on the future of cryptoart and NFTs.
This is the previously undisclosed story of why Metapurse spent $2.2m on digital art.
Why We Spent $2.2M on Digital Art
A few things to know first:
- Beeple is an iconic American artist, with 1.7mn followers on Instagram. He has worked with top companies and artists, like Louis Vuitton, SpaceX, Apple, Justin Bieber, Katy Perry, Marshmello, and many more.
- The weekend of Dec 11, Beeple sold select works of his at an auction on Nifty Gateway, an NFT marketplace. Proceeds were in excess of $3.5 million.
- Of this, Metapurse, an NFT Fund and Production Studio, purchased all of the 20 single edition works for a whopping $2.2 million.
- Acquiring a ‘complete set’ in an open auction is practically impossible. This makes the Metapurse acquisition historic and a likely one-off.
Here’s how we spent millions on digital art, and more importantly, why.
This has never been done before, and for reasons that will soon become clear, this is unlikely to ever happen again.
Whether you’re a fund, institution, or regular crypto whale, a $100,000 NFT purchase is a big event. You might scoop one of these digital assets per year. Three at the most, even considering the burgeoning of this space over the past nine months. This isn’t a factor of affordability alone.
Auctions and bidding wars take a toll on the psyche. They are intense experiences that make you question your intent, conviction, and ego. They put to test your thesis about value, and, where art is involved, they draw on every ounce of cultural and aesthetic sensibility you have.
Participating in an auction is like trying to solve a quantum equation about the meaning of life, while having someone constantly shout in your ear—‘Do you know what the f*ck you’re doing?’
So, even three big buys a year is a big deal. But Metapurse bought 20 single editions of the ‘Beeple: Everydays – The 2020 Collection’ on Nifty Gateway in two days.
The public, no-holds-barred open bidding over the weekend of December 11 was intense, sure, but there was none of the hand-wringing and existential dread that grips you in a typical high-stakes auction.
This had less to do with nerves of steel, and more about having absolute clarity of vision, followed through with a near-perfect game plan.
If you took a virtual walk through his collection, you would have to traverse the largest single estate in Decentraland and run through vast swathes in Cryptovoxels, Somnium Space, and The Sandbox. Looking above, you would see an entire Urbit galaxy and consider your smallness in the scheme of things. The slipstream that just ruffled your virtual hair and sent a shiver down your spine was from the F1 Delta Time 1-1-1 whizzing by. And that work of art that made you stop in your tracks is First Supper, the first ever programmable piece of NFT art. The point is Metakovan has written a few chapters in the crypto auction playbook. But this endeavour was something else altogether.
Over the two weeks leading up to the Beeple drop, we had long, freewheeling conversations about the financial structures around cryptoart: the relative stability of value versus the illiquid nature of these assets, the socio-economic limitations around exposure to high value NFTs, and the inevitability of crypto imitating real world financial models and with it, its inequities. Conversations like these are irrelevant if the only purpose of buying an NFT is to flip it for a higher price sometime in the future. For Metapurse, the acquisition was the first phase of something, not an end in itself.
Once the idea seemed tangible, we moved on to strategy and execution.
We decided to play this under the radar. Metakovan created two dozen wallets: some named after the seven hills of Rome; others after Charles Babbage and Blaise Pascal; a few obscure names from Indian mythology; and a few portmanteaus. He moved around money and gradually fueled them all over several days. This prep was essential: going in guns blazing through the front door would attract too many eyeballs and pump prices up to impossible levels.
Separated by an ocean, we set up our consoles, split access to the wallets, established a constant comms link, and went fishing for Beeples.
Nifty Gateway isn’t a languid marketplace where you can wade in, scoop something big, and go your way. This is the open ocean with whale-infested waters. We had to treat every auction—typically separated by 30 minutes—as an individual battle. And we couldn’t stop till we had all 20.
There aren’t that many whales in this space yet. Not nearly enough to lose track of or forget. Imagine this weekend from their point of view. Bidding for one piece and letting it go, then bidding for another and losing, again and again.
We didn’t want to, but we were goading the biggest collectors in the NFT space, not once or twice, but twenty times over. It didn’t help that nobody had the slightest clue why someone would fight so doggedly for an NFT, and against proven kings of the NFT hill.
The patterns of aggression, frustration, and, at times, plain peevishness were fascinating. Every collector had a unique style. Some came in with grand, jaw-dropping increments of $25,000. Others hacked away with $50 increments after the price had topped $100,000! We tried to mask our style by mixing it up; picking strategies from one collector and using it against another in a concurrent auction.
Here are some of the more memorable battles from the series.
- Purgatory: Increments of $50. Frays the nerves, feels like a drop of ice cold water on the forehead every four minutes. The only way to beat it is to bid in tandem.
- Reprieve: The shortest run. It was like all of the collectors involved understood each other. The bidding was efficient, sensible, and chivalrous.
- The Beast: We thought it would never end. There were three concurrent auctions because of this one piece, and despite being the penultimate in the series, it was the last to be sold off.
Two very long nights. Over seven hours of non-stop bidding. A couple of connectivity scares. A power outage. In the end, we had done it. We scooped every one of the 20 single editions from Beeple’s Nifty Gateway drop.
Here’s how Beeple saw it.
Let’s understand the ecosystem in which we invested $2.2 million. Exposure to high value NFTs is far from diverse. If you’re a whale, you zero in on the high selling artists in the space and collect them to flip big in the future. For a regular crypto holder, this is impossible because the bottom price of a piece from an established artist crossed the 10 ETH barrier months ago. Auctions become largely spectator sports where two or three whales slug it out and walk away with the trophy.
Meanwhile the non-whales look for diamonds in the rough—emerging projects or artists with a prolific output and savvy social presence—and just like the whales, wait to flip them in the future. It is no accident that this is reminiscent of the early days of DeFi. What NFTs gain with baked-in insulation against volatility, they lose by being illiquid monoliths. And just as it did with DeFi, the liquidity situation is now changing.
Since April 2020, we have seen more than a few interesting experiments in the space - notably the vault-backed WHALE token, sharding on Niftex, and NFT-based lending on NFTfi. There are other financial experiments too—variations in how cryptoart sales occur, and symbiotic arrangements between artist and collector, like Bitcoin Volatility for instance. These are all frontier attempts at infusing movement and liquidity around unique digital assets.
In order to enable widespread, liquid exposure to high value NFTs, Metapurse has designed a financial experiment around the Beeple 20 drop. The details of this experiment will be unfurled over the next few weeks, but it draws deeply from past efforts and amplifies the network effects by scaling the effort. You might find most of the answers at metapurse.fund (full website coming soon).
In all the heady excitement, however, it is important to remember that plunging into an asset class like NFTs is not a science and, by its very nature, will never be.
If you are new to this space, and if your thesis around NFTs is numeric or statistical alone, you might as well pack up and leave.
Not All NFTs are Created Equal (Don’t Try This at Home)
Where does value come from? If you were to consider Bitcoin, the forebear of all this, the value comes from its origin story. This is the same of any brand, of any asset. Until NFTs came along, the story of an asset has remained untapped. The moment they are minted, NFTs are imbued with a story that is visible and interactive in some form. NFTs are therefore like batteries that trap and store value.
This is the secret sauce. That said, it is very, very, important to remember that not all NFTs are created equal.
Being able to monetize stories doesn’t mean all stories are valuable. There are so many ingredients (variables, if you will) that need to come together. Consider the journey of the artist, the aesthetic and narrative layers of the art itself, and even the collector who ultimately gets to own it. It is anybody’s guess what impact the art will have a day later, how durable the meme is, or how deeply it can burrow itself in the common psyche.
This is not a science and is not discoverable by numbers alone, and this is the best part of the metaverse. It forces economics to move out of its comfort zone and engage with culture. The art, the games, and the music; these are not skins or mediums for economic models – they are the economic model. NFTs represent this convergence. And to capture the zeitgeist of this movement is why Metapurse exists.
Metapurse has a long history of acquiring culturally significant NFTs; rich relationships with creators, newsmakers, and the ever-expanding artist community; a deep and practical understanding of tokenomics; and above all, a certain brand of frontier madness not unlike the kind you found in early bitcoin days. These are completely the result of providence, and therefore impossible to mimic or remake without going through the entire 7-year journey.
If our NFT thesis holds, then 2021 will obliviate all the hullabaloo around the $2.2 mn spend before the first quarter is up and will go on to mythologize ideas around the ownership and experience of NFTs. That’s where the real value is.
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Twobadour is a former journalist across print and broadcast. Digital truffle sniffer. Gets DeFi, loves NFT, writes everything. Stewards Metapurse, co-hosts the WIP Meetup Asia, heads comms for Lendroid and WhaleStreet.