Back in 2021, during the heyday of NFT hype and the second year of the pandemic, there was an increased appetite for all things related to the digital art market. This was epitomised by the US$1 billion valuation of Masterworks in October that year. Founded in 2017, Masterworks is a financial investment platform that purchases blue-chip paintings to securitise and sell them as fractional investments to individual investors. It basically transforms artworks into investible shares.

The success of Masterworks represented the zeitgeist of pandemic era, dubbed the YOLO economy. Online bidding for luxury items and investing in stocks were viewed as an outlet for those restless during lockdown or a shortcut to increased wealth for those with a bit more savings to burn. Vox termed this perspective the gamification of money.

Fast forward to 2023 in the midst of a global financial crisis and an even more tumultuous art industry. According to an extensive report by ARTnews, the unicorn company Masterworks has been facing “conflicting business strategies, rifts between management and key teams and non-existent human resources practices.”

More troublingly, Masterworks’ employee incentive structures and selling tactics may place the company “at risk of violating Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) rules and regulations” in the US.

This is concerning since the US SEC and similar regulatory entities, even in the most start-up-friendly countries, are currently looking to clamp down on fintech companies after the craze surrounding crypto and meme-stocks over the past few years. Hence, launching a fintech start-up at this point, especially one geared towards the art market – best described as a highly unregulated fiscal minefield – would only bring more intense scrutiny and myriad challenges.

Nonetheless, research conducted by London-based ArtTactic this July documented a growing number of fractional art platforms.

The slew of new companies focusing on fractionalization and tokenization include Artex Stock Exchange co-founded by financiers Prince Wenceslas von Liechtenstein and Yassir Benjelloun-Touimi; Weng Art Invest, a trading platform promising collectors and investors the chance to buy and sell selected limited editions by acclaimed contemporary artists without high costs such as sales tax, import tax, resale rights, storage and more; Particle launched by former Christie’s co-chairman Loïc Gouzer. These are just a few of the latest outfits emerging in the growing sector.

ArtTactic’s Fractional Ownership Monitor revealed that “interest in fractional ownership investments in art and collectibles shows no sign of abating,” despite a downturn in global art trade.

The Hiscox Online Art Trade Report 2023 indicated only 9% of the art buyers surveyed said they had invested in a share in an artwork or collectible over the past 12 months, but 61% said they were likely to do so over the next 12 months.

As NFTs descend into worthlessness, how can there possibly be growing interest to buy and sell tokenised art? In the case of Masterworks, this is done via an online business model that allows the company to flip works at a “10% gross profit every time it buys”, while keeping 20% of the upside on the art it has already sold, along with a management fee.

Yes, these fintech platforms ideally offer investors returns that have a low correlation with stocks or bonds. But the real answer for their popularity lies in the very nature of optimistic techno-futurism. On 16 October, famed Silicon Valley venture capitalist Marc Andreessen published “The Techno-Optimist Manifesto” and it provides a revealing look at the inherent techno-triumphalism of the minds behind some of the biggest digital disruptions of our time.

“The Enemy”, as Andreessen specifies, is the ongoing “mass demoralization campaign” against technology, “under varying names like ‘existential risk’, ‘sustainability’, ‘ESG’, ‘Sustainable Development Goals’, ‘social responsibility’, ‘stakeholder capitalism’, ‘Precautionary Principle’, ‘trust and safety’, ‘tech ethics’, “risk management’, “de-growth’, ‘the limits of growth’.”

Given this mindset, it is not unsurprising that aspiring tech investors and entrepreneurs are backing factional selling of art, especially amidst growing scrutiny from regulatory bodies. Also, the rise of young collectors who work in the tech industry and are familiar with the digital realm explains the increasing demand.    

Then, there’s the traditional art world – with its entrenched structures of power and privilege, it is no stranger to the fundamental beliefs resonant with the blinkered techno-optimism of tech titans. The “sense of virility via the machine” that underpins such tech visionaries is not so different from the virility of the art market which entire personalities of mega art dealers hinge upon.

It is pretty much observable fact that the pandemic and its lockdown-spurred boredom economy accelerated the already burgeoning investment-geared mindset of art collecting. But it is the escalating mind meld of the 21^st century art market and tech industry that has opened the door to eschewing patronage for something much more facsimile.

A version of this analysis was commissioned by London-based Pictorum Advisory for their October Quarterly Report.