How is Art like Bitcoin?
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By Alvin Cheng-Hin Lim

How is Art like Bitcoin?

Jan. 23, 2018  |     |  0 comments

A recent commentary on MarketWatch presents the argument that while blockchain technology is useful and has intrinsic value, the same cannot be said of bitcoin, the original cryptocurrency built on blockchain technology. As the author points out, the recent stratospheric appreciation of bitcoin demonstrates its tremendous market value to speculators, but at the same time its volatility has degraded its utility as a medium of exchange, which for a normal currency serves as its intrinsic value — that is, “the tangible value it provides,” which “may or may not equal the market value at any one time.” The speculative interest in bitcoin has allowed its market value to soar above its intrinsic value, which is how “financial bubbles of all kinds are born.” Given that speculative bubbles have long affected markets around the world, bitcoin is hardly the first object to have this gulf between its intrinsic value and market value. Indeed, the world of art is ripe with objects presenting this same phenomenon.


The MarketWatch commentary suggests that “a good way to think about intrinsic value is as a floor to the value of any object. If the market value falls below that floor, enough people will simply choose to use the object rather than sell it, since they get more value out of keeping it.” From this perspective, many works of art do possess intrinsic value, as they provide their audiences with emotional stimulation — including sensations like awe or pleasure — as demonstrated in this famous scene from Mad Men highlighting the affective experience of gazing at a Rothko painting. However, for many other artworks, their negligible intrinsic value has not prevented exponential appreciations in their market value.


The reason for this may be found in what the late art critic Arthur Danto famously described as the artworld. In his seminal 1964 essay, Danto described the artworld as the milieu of artists and aesthetic experts who serve as the gatekeepers separating art from non-art. It is through the judgement of the artworld that objects like Andy Warhol’s controversial Brillo Box sculptures gain recognition as artworks (pp. 580-584). But apart from deciding what is and is not art, the artworld also has a key role in determining the market value of artworks.


Just as cryptocurrency entrepreneurs make great efforts to drive up the market value of Bitcoin, Ethereum, Ripple, and other cryptocurrencies by using initial coin offerings and other marketing schemes to entice investment from curious speculators, members of the artworld — collectors, curators, gallery owners, auction houses, the artists themselves — set the market value of artworks with their commercial interactions. With wealthy collectors keeping their art investments hidden away in secure storage facilities like Singapore’s Le Freeport, it is not the intrinsic value of these artworks, but rather their escalating market value which has intensified their allure for the global art market. The art dealer Simon de Pury recalls, for instance, “some Rothko buyers who didn’t know who Rothko was until he reached $40m … Suddenly they said, ‘this is really interesting!’”


How does the artworld set the market value of artworks? As Allison Schrager explains, prices are established by a complex interplay in which the intrinsic value of the artworks themselves matters little:


“The industry has developed an intricate signaling process where the approval of a handful of galleries, collectors and museums, determines what is good and valuable. Dealers who own and work at art galleries invest many resources in building the artist’s brand. But artists often take years to mature and have uneven periods, so any perception that an artist is over-hyped or overpriced can be anathema to his career … One of the worst things a dealer can do is over-price a work because they can’t lower the price when it doesn’t sell. Dealers may have an extraordinary amount of control over price, but desirable collectors are well educated consumers and won’t blatantly overpay. Galleries may drop an artist rather than lower the price of their work because doing so sends a bad signal about the value of the artist and the credibility of the gallery.”

There are now almost 1,500 different cryptocurrencies on the market. Speculators who lose interest in one have a growing number of other cryptocurrencies competing for their attention.

The spectacular rise and fall of the recent art movement known as zombie formalism illustrates how the artworld can encourage stratospheric market valuations of artworks which to the trained eye have little intrinsic value. As the art critic Jerry Saltz recounts:


“After it all fell apart with the 2008 market collapse, a paradox arose. The art market just got stronger. Much stronger. Painting, especially, became a safe place to park money, make money, all while gaining social cache. Art students everywhere, swamped by tuition debt but schooled in theory and the coolness of Krebber and others, considered painting not as an escape from the market but maybe an escape into it. There have never been more uneducated collectors shopping for art that looks like other art and never more money to shop for it.”


The result was an “onslaught of copycat mediocrity and mechanical art” designed to attract this lucrative niche market that consisted of “not very sophisticated speculator-collectors who prey on their wealthy friends and their friends’ wealthy friends, getting them to buy the same look-alike art … All this painting employs a similar vocabulary of smudges, stains, spray paint, flecks, spills, splotches, almost-monochromatic fields, silk-screening, or stenciling. Edge-to-edge, geometric, or biomorphic composition is de rigueur, as are irregular grids, lattice and moiré patterns, ovular shapes, and stripes, with maybe some collage.”


At its peak, the market in zombie formalism saw speculative appreciations in market value similar to that found in the market for Bitcoin and other cryptocurrencies. As Pernilla Holmes gushed in December 2014, a year before the market collapsed: “The waiting lists to buy the most interesting of these artists … can be very long indeed. In addition to that demand, frissons created by the occasionally exponential prices achieved at auction drive up gallery prices fast. Recent examples include Israel Lund’s 2013 Untitled painting which sold for $125,000 this May at Christie’s, over 16 times the $7,500 it fetched from his gallery show the previous June; or internet artist Parker Ito’s The Agony and the Ecstasy, which fetched £56,250 against an estimate of £10,000-£15,000 at Sotheby’s this February.”


Also writing a year before the collapse of the market, Noah Dillon presciently warned of zombie formalism: “Today’s scholars, critics, and curators are apparently eager to rediscover middling parishioners from the church of the grid and rectangle who have since fallen by the historical wayside. They should, and we shouldn’t be surprised if many new painters are consigned to such fates in the near and distant future.”


The speculative bubble in zombie formalism collapsed in 2015. As Katya Kazakina recounts of the market’s rapid decline that year: “Now sellers are trying to offload works at auction … Contemporary art auctions at Christie’s, Sotheby’s and Phillips in New York fell 26 percent to $33 million in September from $44.8 million during the same sales last year as a third of lots failed to sell. Just 63 percent of artworks created in the past four years found buyers, 22 percent less than last year.”


During the exuberant period when increasing demand from art speculators contributed to a rapid appreciation in the market value of these artworks, “the artists were just slamming them out.” Once the resulting overproduction met with a collapse in demand, the market value of these artworks likewise collapsed. As a gallery owner observed: “The era in which you could buy something for $3,000 and sell it for $100,000 a month later is fully over.” Indeed, the collapse of the bubble was such that the desperate speculators were willing to take massive losses to recoup some meagre amount of their investments. As one buyer who lost 80% of his investment explained: “I’d rather take a loss … I feel like it can go to zero. It’s like a stock that crashed.”


As the aforementioned MarketWatch commentary notes of the cryptocurrency market, “there is absolutely no limit to the number of cryptocurrencies that can be created,” and cryptocurrency entrepreneurs face little difficulty in creating new cryptocurrencies to entice interested speculators. Indeed, as of this time of writing, there are now almost 1,500 different cryptocurrencies on the market. Speculators who lose interest in one have a growing number of other cryptocurrencies competing for their attention. Likewise, in the art market, new forms of art are constantly emerging to compete for the attention of investors and speculators. One of the hot new trends, for instance, is fermentation, with the entrepreneurial artists marketing their artworks as manifesting contemporary political ideals of diversity and transformation. However, it remains to be seen whether this and other new trends in the artworld have sufficient allure to capture the lucrative interest of investors and speculators.




Danto, A. (1964). The Artworld. The Journal of Philosophy, 61(19), 571-584.


Dillon, N. (2014, October 31). The Zombies: Contemporary Abstraction and Its Critics. Artcritical.


Holmes, P. (2014, December 6). Process-based Art’s Rise. Financial Times.


Kazakina, K. (2015, October 3). Speculative ‘Fever’ for Young Artists Cools in New York Auctions. Bloomberg.


Kazakina, K. (2016, September 19). That $100,000 Painting Bought to Flip Is Now Worth About $20,000. Bloomberg.


Leddy, S. (2018, January 3). The Art World’s Strangest New Trend—Fermentation. Artsy.


Lim, A. C. H. (2018, January 4). Our Blockchain Future. IPP Review.


Lum, S. (2017, April 30). $1.4b Art Row Puts Secretive Market in Spotlight. The Straits Times.


Morris, J. (2017, December 19). Flipping, Freeports and Fakers: The Commodification of Fine Art. The Art Newspaper.


Saltz, J. (2014, June 17). Zombies on the Walls: Why Does So Much New Abstraction Look the Same? Vulture.


Saltz, J. (2015, November 13). The Malignant Influence of Michael Krebber: How Early-’00s Abstraction Gave Way to Zombie Formalism. Vulture.


Schrager, A. (2013, July 11). High-end Art is One of the Most Manipulated Markets in the World. Quartz.


The Unassuming Banker. (2018, January 10). Why Bitcoin is Worth Exactly $0 (and Blockchain Might Be Very Valuable). MarketWatch.

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