If Art Isn't A Bubble, Maybe Bitcoin Isn't Either

Authored by Peter Tchir via Forbes.com,

I am getting tired of reading article after article comparing the rise of Bitcoin to tulips (link).  Or the rise of Bitcoin to the South Sea Company bubble (link).   Maybe the detractors are just comparing it to the wrong asset that is difficult to value but continues to rise in price. 

Someone paid $450,300,000 for a Leonardo da Vinci painting of dubious provenence that quite frankly struck me as ghastly (link). 

If Bitcoin, or cryptocurrency pricing is supposed to be "rational", then why shouldn’t art be subject to the same standard?  The cost of material for most art is only a fraction of the alleged ‘value’.  Why does Bitcoin need some inherent value, while art doesn’t?

Basically, if $450 million for a painting isn’t a bubble – why are we so sure that Bitcoin has to be a bubble?

Can you really get that much aesthetic value from looking at that painting?  Maybe it’s just me, but I remember rushing around the Louvre to see the Mona Lisa and being disappointed.  I’ve seen that and other famous ‘must see’ paintings and usually walk away wondering what was so special. 

Yes, maybe I am just too plebian to understand the meaning.  When I look at Black on Grey or Orange and Yellow, I think I can understand exactly what the artist was thinking – “If I can sell this, I have a whole series to color combinations to foist on the public!”

Maybe it is the attention you receive for owning it?  

If I had $450 million to plunk down on something, I’d own a part of a sports team as I think you get a lot more attention and perks from owning part of a sports team than a piece of art.

Then why aren’t we bombarded with daily rants about the art world being crazy?

  1. What would the Sunday paper be without an Arts session?
  2. How embarrassing would an Art History degree look if art collapsed.
  3. What would all the auction houses do?
  4. What stores would fit between the confectionaries and real estate stores in a typical vacation town?

There is an infrastructure that has been built up to support the concept of art as value and one designed to push the price ever higher and it has worked for a very long time.  Every few years it seems that there is some unbelievable record setting price at auction, only to be surpassed by some new record.

The art world has also been very smart to create ‘‘entry’ level gateways for would be art collectors.  These lithographs, sketches, numbered prints are the art world’s equivalent of LiteCoin, BitCash, Ripple, Ethereum, etc.

While I cannot fathom why art sells for what it does, it has sold at prices that defy most market related measures of value for decades, if not centuries and is not subjected to daily comparisons to tulips or South Sea corporations.  

Maybe Bitcoin shouldn’t be compared so blithely to tulips either.

I am not sure what the long term path for cryptocurrencies are, but the detractors need to start coming up with better arguments – as the cryptos are tulips argument just doesn’t cut it.

Comments

Ramesees Give_me_liberty_or Mon, 12/18/2017 - 09:46 Permalink

If everything's a bubble is anything a bubble?  Money printing is the problem - the assets are just where the money naturally goes. Buy assets - doesn't matter which ones. The Millenials - the largest generation since the Boomers - are coming through and despite all the trendpieces about how Millenials want "experiences not things", there are going to be a lot of them chasing their parents' lifestyles. Buy real estate. Buy gold. Buy bitcoin. Buy equities. 

In reply to by Give_me_liberty_or

Endgame Napoleon Stuck on Zero Mon, 12/18/2017 - 11:21 Permalink

You could not buy The Swamp for that $450 million; they are much too greedy to accept such a low bid.

I think the best way for the article writer to understand why some art sells for a high price is to try painting a reproduction of a Leonardo, replicating the subtle, graduated shading, whether it is that painting or one with a better composition and more depth.

Otherwise, do a modernist painting (or a traditional Chinese ink painting), using a style that does not favor the gradual build up of tone through layering, but that requires laying the paint on perfectly the first time.

Good luck.

What it requires is the following:

1) advanced drawing skills (knowledge of the way light falls on objects, perspective and serious observational skills)

2) advanced painting skills (knowledge of how to make an endless range of neutrals from complements and how the pigments interact with each other, their handling properties and the way innumerable tools affect the application of paint)

You will have to apply all that you learned about shading when mastering drawing to the much more complex matter of color, achieving the same tonal effects, but with the additional complexity of color.

You will find that the mixing, layering and color theory knowledge alone, much less the honed technique required to lay the paint on so delicately, is mighty hard.

You will be very surprised how, like the way one tiny alteration of code can change a whole web page, the tiniest flaws can ruin a painting. This is true in abstract work as well, and if you zoom in on the details of the most realistic artwork, it is all abstract patterns, working together to make a whole design. It is hard to think so abstractly that you achieve a result that is even passable as a realistic painting, much less masterful.

The $450-million painting is not necessarily a fake. It could be one of Leonardo’s efforts at achieving both realism and compositional excellence that fell a little short. The delicate sfumato-style shading is good, very Leonardo-like. It is especially hard to map out the composition well, while also producing stellar shading, pitch-perfect color harmony, etc.

Composition-wise, it is true that the paintings below are better.

https://en.m.wikipedia.org/wiki/Lady_with_an_Ermine

https://en.m.wikipedia.org/wiki/St._John_the_Baptist_(Leonardo)

They are not crowded. They use what is called negative space better.

But humans do not always produce their best work every time.

I do not think the top version of the Leonardo painting below has top-rate composition, any more than the $450-million painting.

https://en.m.wikipedia.org/wiki/Virgin_of_the_Rocks

But it might just be the fact that when you change one thing in a painting, however small, you often have to adjust everything else just to keep the visual balance. Whether it is just that Leonardo worked out the shading and color better in the second version, the bottom version is more balanced and visually powerful, proving that Leonardo varied in his output even when painting the same composition [like all humans]. He was not a robot.

In reply to by Stuck on Zero

pods Ramesees Mon, 12/18/2017 - 10:41 Permalink

Same could apply to gold and gold futures.Gold contracts are settled in cash, and in fact they all say they can be settled in cash if someone tries and take delivery to blow the system up.  All the big players in gold futures are gamblers. Not jewelers. BTC futures will impact the valuation.  But the BTC swings are so wild as it is, you might not even notice the effect that futures have.pods

In reply to by Ramesees

PT Kina Mon, 12/18/2017 - 09:40 Permalink

Let the art speak for itself.  Everyone had to start somewhere.  There is a reason some works take so long to get "discovered"."Oh, looky!  A long 'lost' Da Vinci ... when he was aged three.""Oh, looky!  A long 'lost' Beatles song.  A long 'lost' Elvis song ..."

In reply to by Kina

Endgame Napoleon PT Mon, 12/18/2017 - 11:30 Permalink

Maybe, it was an early Da Vinci before he honed his compositional skills. Painting is not as much like music, with its youthful masters. Painting is often slow and methodical, especially the type of painting done by Leonardo. Even rapid-pace painting with no layering (glazing) requires great accuracy. It also takes a lot of experience to master.

In reply to by PT

One of these i… Kina Mon, 12/18/2017 - 11:11 Permalink

I remember watching Dave Bates playing his interpretation of Lynrd Skynrd's "Freebird", and doing (it's fair to say), a bang up job on that geetarr playing.But he just wasn't lucky enough to get famous and overpaid for his talent.I intercepted a big box of a guys art (which he has done painstakingly and over a great perod of time) a few years back on it's way to the bin.He's no genius, just a bloke who stacks shelves, and he doesn't even think of himself as an artist, but if he only had a patron...Building yourself a repution is the real talent of value it seems to me.. 

In reply to by Kina

Endgame Napoleon One of these i… Mon, 12/18/2017 - 11:41 Permalink

Good thing you rescued that artwork. The truth is that most people do not know and do not care what is involved in making such artwork. I say that as someone who owned a shop and worked in an art-related industry for a long time. The only time I saw a volume of customers who cared as much about fine art as their decor was when working in a fine gallery. Even there, family photos were the bread-and-butter, albeit the family photos there were often in the category of art photography. Fine art has a limited market, so of course, only a few artists rise within that narrow market of art buyers. But — worldwide — the art market is bigger.

In reply to by One of these i…

lil dirtball BaBaBouy Mon, 12/18/2017 - 09:52 Permalink

> That was the last DaVinci left on the open market

It's a fake. (((Forbes))) is just perpetuating the myth that the art market is real when in fact it's just a m0ney laundering mechanism for the elite.

I suspect that's what BTC is, also. (((Forbes))) is just adding some diversion from the obvious.

http://www.mileswmathis.com/launder.pdf

http://mileswmathis.com/davinci.pdf

In reply to by BaBaBouy

PT lil dirtball Mon, 12/18/2017 - 10:27 Permalink

Thanks for that.  I can't remember how long ago it was before I realized that half the art market was money laundering but the thought that immediately followed was, "It's so obvious.  Why on earth did I NOT figure it out sooner???"  I had no evidence, just logic.  It made more sense than to pretend the art really was "worth" that much.

In reply to by lil dirtball

Buckaroo Banzai lil dirtball Mon, 12/18/2017 - 11:16 Permalink

"I suspect that's what BTC is, also. (((Forbes))) is just adding some diversion from the obvious."If modern "art" works so great as money laundering currency, why on earth would they reinvent the wheel? Maybe if BTC hits $1 million one day, I'd start to believe you. But right now the market cap of BitCoin probably isn't 1% the market cap of the art market.But the worst part is that BTC operates on a public ledger, and is pseudonymous, not anonymous. The international art market is completely anonymous. Why replace something that works with a less-fully-featured version that requires a huge infrastructure investment to even function?

In reply to by lil dirtball

Endgame Napoleon lil dirtball Mon, 12/18/2017 - 11:55 Permalink

The art market IS real; it is just narrow. Most art buyers at that level are more like philanthropists, making it even worse to equate them with money launderers. They often end up donating the art to museums.

Valuable art is INCREDIBLY expensive to insure and to conserve.

Given the limit number of art buyers and changing tastes, scholarship, etc., art buyers have no guarantee that, if they need to sell, they will make money over time. Each year they hold the artwork, they have to insure it and care for it, eating into any profit.

Scholars are fickle, focusing on this art movement for awhile and then glorifying another style of art later, resulting in higher prices for artwork that sells within the timeframe when it is the focus of scholarly research and media trends.

I think art buyers also pay capital gains tax when the artwork is sold, although I am no expert. I do know there used to be a small tax deduction for purchases [under] a certain amount.

They probably removed it to fund more refundable tax-welfare checks in April to reward illegal aliens and single moms for high womb productivity, while they work part time to keep within the earned-income limit for welfare.

In reply to by lil dirtball

Calculus99 Mon, 12/18/2017 - 09:24 Permalink

The main problems any long term CC holder has right now, and probably going forward, is where to cover. The art, and it is a REAL art, of profit taking is the hardest of all the trading/investment skills to learn. And even then, there are no proper solutions, the best one can do is develop a semi-good profit taking plan. The sad reality is simple - most CC longs are going to mess up when they cover...