Investing in art is a rite of passage for financial heavyweights, marking their transformation from unrefined market players to modern aristocrats.

Billions of dollars made playing stocks and bonds are funneled into a Jasper Johns painting on the wall, Picassos in a bunker at the Geneva Free Port or, famously in the case of Steve Cohen, a 14-foot tiger shark preserved in formaldehyde by Damien Hirst at the center of a penthouse living room.

With Bitcoin surging more than 400% over the last year and trading near all-time highs, it’s the crypto-millionaires’ turn to dabble in the finer things. Sales of digital art have skyrocketed from $235,000 in Feb. 2020 to $63 million this month, according to data from Cryptoart.io, which tracks sales across six auction houses. What’s new in this instance is the art, like the currencies, has no physical presence.

WATCH: Christie’s announced it would auction a work by the artist Beeple.

The core case for buying digital rather than physical art is that it comes with a publicly verifiable record — a non-fungible token, or NFT — that ascribes ownership and authenticates a work through public blockchains. In exchange for opting for something you can only see on a screen rather than hang on a wall, the buyer never has to worry about the issue of provenance. The question of authenticity has bedeviled even the most venerable of real-world art dealers: Manhattan’s Knoedler Gallery went out of business in 2011 after being sued for selling millions worth of sham paintings made by a forgery ring based in Queens.

And while the chain of custody is guaranteed, there’s no such promise that what’s on offer will suit the typical art buyer’s tastes. Much of what occupies online galleries reflects the sensibilities of crypto enthusiasts: memes, jokes and coins. Bitcoin, Ether and the Ethereum blockchain’s creator Vitalik Buterin are favored, if not trite, muses.

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The Bitcoin Angel by Trevor Jones

Last week Nyan Cat, an animated image of a flying feline with a rainbow trail, sold at auction for 300 Ether, about $600,000. A collection of work from digital artist Mike Winkelmann, who works under the nom de mouse “Beeple,” fetched more than $3.5 million in December. A collage of 5,000 of his works held by Christie’s is expected to surpass that haul. Winkelmann’s “Crossroad,” a gif that depicts people walking past a dead former President Donald Trump sold on the secondary market Wednesday for $6.6 million, according to online marketplace Nifty Gateway.

“There’s a lot of physical art out there that is essentially just a certificate of authenticity.” said Duncan Cock Foster, who along with his twin Griffin is a co-founder of Nifty Gateway. Cock Foster pointed to Marcel Duchamp’s famous work ‘Fountain’ as an example. The piece, which presents an upside-down urinal as a water fountain, can easily be recreated, yet it’s remained sought after because of its clear ties to the conceptual master.

For digital artists, NFTs finally allow them to profit from their work by making an otherwise public good into private property. A gif that was once just a right-click away from being copied and passed off as the genuine article can now be easily validated.

The artist and technologist Drue Kataoka sees digital art as the future. She says the subgenre of crypto art is being held back by the art-world establishment’s “severe (and purposeful) misunderstanding of digital art as a novelty, a gag gift or a modern tulip mania.” As a result, she wrote in an email, “much of the recent auction craze comes across as a middle aged suburban soccer dad trying really hard to be ‘cool’ — good intentioned, but awkwardly weird.”

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NFTs have been around for almost a decade. Colored Coins, bitcoins from the first transaction on the ledger, were perhaps the first example. Because anyone could see which coins came from the genesis block, it was argued that they should be valued as rare coins. But it wasn’t until recent months that the market began to take off. Low interest rates, surging cryptocurrency prices and easy-to-use online auction houses helped set off a tidal wave of buying. Now, Crypto enthusiasts have a means of diversifying their assets while showing off a novel use case for the technology that underpins their newfound wealth.

“I think the main reason why NFTs started to blow up over the last two weeks is that people started to realize it’s just a natural evolution of the market,” said the anonymous collector known as WhaleShark who is thought to be one of the largest NFT holders in the world. The most valuable NFT he’s ever owned came from NBA Top Shot, a platform that marries the trading of the league’s top highlights with cryptocurrency, likely would sell for up to $1 million, he said.

At least one YouTube sensation has gotten in on the action. With a sale starting on Feb. 19, Logan Paul raked in more than $5 million selling Pokemon-inspired NFTs of himself for one Ether each. In the process, he introduced his nearly six million Twitter followers to the burgeoning marketplace. “Logan Paul is normalizing NFTs,” says Tiffany Zhong, chief executive officer of Islands, a platform helping creators monetize their audiences.

Anthony Pompliano, the Bitcoin evangelist and co-founder of Morgan Creek Digital Assets, joined the fray Tuesday by putting ‘The Innovator’s Dinner’ on the auction block for a whopping 639 Ether (more than $1 million at the current rate of exchange). The surrealist interpretation of Da Vinci’s ‘The Last Supper’ substitutes Jesus Christ and his apostles for luminaries of industry and pop-culture such as Steve Jobs and Beyonce, with a dunking Michael Jordan in the background.

Crypto-experts like Coin Metrics co-founder Nic Carter caution that the market is in danger of overheating.

“It certainly seems frothy, but the kernel of a good idea is there and will continue to thrive,” said Carter.

But even if the current mania for art-based NFTs ultimately goes bust, the groundwork is being laid for a later time when more assets live on blockchains.

“In the future I expect that we see NFTs move beyond the domain of ‘autographed PNGs’ and move into the domain of more instrumental tokens – digital artifacts tied to some genuine utility,” said Carter.

— With assistance by Elisabeth Ponsot

(Updates with quote from digital artist)

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