Recently, I was asked if cryptocurrency would affect the value of old coins and paper currency on the secondary market. In other words, if we’re all using digital currencies to make transactions, will certain numismatics be worth more at auction?
It’s a great question, and while I believe collectors will continue to pay top dollar for rare coins and currency in mint condition, it’s hard to predict what younger generations will collect, particularly if they are raised using cryptocurrency.
There’s no doubt in my mind that Bitcoin, Litecoin, Ethereum, Zcash and other forms of cryptocurrencies will transform the auction industry. These are examples of virtual currencies with decentralized control – there’s no mediators like a bank. Transactions are recorded via blockchain, a global digital ledger recorded chronologically and publicly. Blockchain is also very difficult to hack.
Not only have we had customers express interest in paying this way, the industry is already seeing some big-ticket items sell at auction via cryptocurrencies.
Just last month, Dadiani Gallery in London launched the world’s first blockchain auction via Maecenas to sell shares of Andy Warhol’s “14 Small Electric Chairs” painting. According to reports, the painting is worth $5.6 million, which is equivalent to roughly 850 bitcoin. But, only 49 percent of shares will be sold. The painting will stay with Eleesa Dadiani, also known as the “Queen of Crypto.” While there is a $4 million reserve, a smart contract run on the Ethereum blockchain will determine the final price for the painting.
Another high-profile blockchain auction that launched last month was Richard Hilton’s $38 million mansion in Rome. Yes, that Richard Hilton, chairman of Hilton & Hyland and father of reality TV star, Paris.
You can even have fractional ownership of some of the most rare and expensive collectible cars via the blockchain-based platform, BitCar. You won’t be able to drive it and you may never see it. Instead, the luxury car you invest in will be stored and resold five to 15 years later. Of course, you’ll be banking on the hope that the value of the car increased.
Even the U.S. Marshals can’t ignore the value of cryptocurrencies. In January, they auctioned more than 3,600 bitcoin with an estimated worth of $42 million. Then in March, they auctioned approximately 2,170 bitcoins, about $25 million, in connection with various federal criminal, civil and administrative cases.
Of course, cryptocurrency is not without controversy. Facebook and Google recently banned cryptocurrency-related ad content. During a congressional hearing in March, it was suggested that regulations were needed for the “crypto-craze.” Some are even saying it could be a health hazard. A rehab facility in Scotland recently made news by offering a new program to treat what therapists describe as cryptocurrency trading addiction.
I think cryptocurrency is here to stay. It will likely evolve, and it may take time for collectors to embrace it, but I would not be surprised if our auction house begins accepting this type of payment in the future.
Erik Hoyer owns EJ’s Auction & Consignment in Glendale.