On February 23, 2022, Sotheby's was getting ready for a $30 million auction.
It's a lot of money, but it's actually tiny for Sotheby's.
In one event that could sell up to Billion Dollars.
So, this $30M auction is just nothing, should be an easy sale, right?
Not quite. Twenty-five minutes after the event was supposed to start, nothing happened. Then,
an employee took the microphone and said, "the auction is off."
Fans, connoisseurs, and millionaires alike gasped in shock. Potential buyers
wanted answers, but Sotheby's PR was blunt and silent.
The rest of the world had a field day speculating why this happened.
Why would they back out at the last minute?
Well, it's because the auction house is dying as we know it.
So let's talk about it in this episode of Forensics.
Auctions are kind of cool, they're elegant, exclusive,
and hold the most expensive art pieces in history, they're visceral.
It's humanity's desire for possessions, luxury, and greed at its best or worst.
Also, is like this primitive competition for who is able to bit more.
Auctioning is an art form that has existed for centuries, millennia even.
In fact, the earliest records show that in 500 BC, in Babylon, people had auctions. Granted,
it was for buying and selling people back then, but the essence is the same.
The Romans and Ancient Greeks loved
them. It helped them sell the bounties they had after successful wars. This way,
they cleaned up the mess, sold valuable stuff to others, and made money.
In history, we've auctioned everything, from castles to entire regions, and yes, to people.
Then, the internet and beanie babies took over.
But one thing remains the same: our drive, as humans, to buy and sell.
Auction houses move big bucks. In 2018, Christie's reported over seven billion dollars in revenue.
Sotheby's reported one billion.
Auctions are still vital for defining international
prices that we paid for a lot of things
think, fish in Sukiya Market in Tokyo,
and in this case in art, they very much define the value of art.
Plus, people trust auctions. Potential buyers get to analyze
the items beforehand to judge the conditions.
And in a way is to see what the marketing is thinking about this product
The auction house sets the buying increments and the minimum asking price. It's very transparent.
Plus, even in recession times, auctions work. For example, after the 2008 recession,
both Sotheby's and Christie's showed impressive sales.
Despite what was going on outside.
So, in the art world, auctions are essential. But
nothing could've prepared auction houses for what was to come.
If you imagine an auction, this is what you think of: a crowd.
Oh, and this guy.
By the way, that's a bit of a myth.
Most art auctioneers speak at a slow pace so that international buyers understand.
But, you imagine a crowd. People raise paddles to bet more and more
on art, cars, houses, and even cattle.
And this has been the equation that has survived for centuries,
even with eBay and online bidding. It was an old model that somehow lingered.
And all of a sudden, it couldn't.
Yes, in history, there have been buyers over the phone.
But they needed someone to physically check the artwork.
It was an essential part of auctioning.
Inspections could make or break the price of a painting.
So, when we couldn't see each other in person, how would the auction survive?
Well, the pandemic actually helped them.
For decades, major auction houses knew they needed to migrate to the digital world.
But it wasn't until the pandemic that they had to.
So, an auctioneer now took center stage in front of screens instead of buyers.
And Zoom calls were excellent. Now, people from far away regions could take part.
This scenario not only shows the adaptability of the art market but its resilience.
There weren’t many markets that continued producing returns
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What they're doing was kind of given.
Technology was here to change the art of the auction and why it did change?
Growing markets like Asia and Africa now had the chance to sell and buy art in the US. Or Europe.
At the same time, Sotheby's and Christie's tapped on the potential of hybrid auctions.
People were now interested not only in art but in other things.
The lockdown drove up the value of more things to enjoy at home.
So, designer furniture, wine, and even cars now find themselves at the same auctions
as paintings and sculptures, because you don't have to fit them through the door.
It's the old and the new together.
At the pandemic's peak, it seemed that auctions had no salvation. But then,
an economic frenzy in 2021 helped fuel demand.
In fact, the big three broke records. Plus, there was something else that would further
change the world of auctions.
There's something I hadn't told you about the whole Sotheby's
thing when they canceled the auction.
They were going to sell an art collection, yes. But, it wasn't any art collection.
They were 104 NFTs.
And yes, it's not the first time that auction houses
sell fads. Sotheby's sold celebrity teddy bears and even Pokemon. Christie's isn't far behind.
But, this time, it was different. It was a
major auction house selling enough NFTs to help set a standard in the marketplace.
People longed to see how much they would go for, and many estimated that it would be $30 million.
Instead, it was an embarrassment.
This is the consignor who had assigned the NFTs to the auction house for sale.
He called it off after a lengthy discussion between the auction and 0x650d
(whatever that means). Then, he took to Twitter.
This guy decided to HODL.
That stands for Hold On for Dear Life,
which crypto buyers use when they hold on to the assets instead of selling them.
The reasons can be endless. Perhaps, the consignor didn't feel the price
was right. Or that the auction wouldn't come up with the minimum.
Now, he can do that, it's not illegal, but the consequences were terrible.
People immediately jumped.
This event was significant for both the NFT world and auction houses alike.
2021 was an essential year for NFTs in the mainstream market.
In March, Christie's started it all when they sold
the digital collage from the artist Beeple, Everydays: the first 5000 days for $69 million.
It marked the so-called beginning of a new era.
Sotheby's wasn't far behind. In April, they participated in their own auction by selling
$17 million in NFTs from an artist named Pak.
So auction houses were willing to dive deep into this new world.
In fact, by the end of 2021, the big auction houses were littered
with people wanting to sell NFTs.
Sotheby's had sold $65 million in NFTs while Christie's had an impressive $100 million.
Sotheby's even launched an NFT platform for auctions in the Metaverse. The big three even
started taking bitcoin and Ethereum as payment.
Times were exciting. But then, this happened.
So, this was a crucial moment that could consolidate the NFT market and
prove that it wasn't a fad.
And it didn't.
That's because NFTs are a different beast.
Think about it.
When a seller places a product in an auction house,
potential buyers can analyze every nook and cranny.
They know the history, and they can analyze the good and bad of the product.
The same doesn't apply to NFTs.
First of all, almost nobody understands what the hell they are.
The Sotheby's VP of digital art once said that buyers didn't even know
what they should do with NFTs after buying them!
Then, there's how much they're worth.
Yes, art does work around speculation, but it's about art in the end. It does exist, and yes,
it's subjective, but check out this chart of art's pricing throughout the last ten years.
And then check out NFT pricing in the last year.
In fact, many rumored that Sotheby's pulled out because of the dropping value
of Ethereum, and it makes perfect sense.
So, when this auction failed, it derailed NFT's reputation. The auctioning community came off as
amateurish and speculative. It's embarrassing for both sides.
But did this mean it was the end of NFTs in auction houses?
No. It's the total opposite. It's only beginning, and NFTs might
work in a way that we don't think of right now.
We have a whole video about it, what I really think about it
We're going digital, that's for sure, but auction houses won't ever sell only NFTs. Not even close.
Art is still the obsession of many of us.
In fact, two months after this blunder, in May 2022,
Sotheby's had broken records by selling the Macklowe Collection for a billion dollars.
Christie's and Phillips were not far behind. The spring auction season of 2022
totaled $2.5 billion.
What did this show? The auction houses could still survive,
and it wasn't the first time they had faced a challenge.
So, while some buyers pay
big bucks for an NFT they don't understand, the potential lies elsewhere.
From a security standpoint, NFTs are
here to stay. They are a way for artists to collect royalties out of every transaction.
I think that is one of the best features.
Art can also have more security by allowing public authentications through blockchain.
And in that coexistence lies the beauty of all this. Auction houses will use NFTs to lure those
in the crypto world, and drive them towards fine art, wines, furniture, and cars.
This is what the world buys. It's a hybrid within a hybrid.
And, yes, auction houses will survive. They will continue to dictate the prices,
whether here or in the Metaverse.