Executive summary

The global art market reached $65 billion in 2018 but it is expanding in fewer hands. As it has grown by 9% over the last decade, the volume of transactions decreased by the same percentage. With the top 5% of dealers generating over 50% of the total revenue, it has become difficult for smaller players to survive and for newbie collectors to buy.

The art market is largely unregulated and frequently operates on trust alone. To protect it, dealers can manipulate and conceal prices of transactions and help to get rid of artworks in delicate situations – all of which is done with the utmost discretion. Known to value its privacy, the market keeps newcomers at bay. Subsequently, trading art penalizes both the seller and the buyer since it lacks transparency, is costly and illiquid.

This modus operandi backfired in the infamous Knoedler case, after which a revision of the business models, higher transparency, and a call for more clarity were made.

Having never catered for the broad public, the art market always kept its focus on a few art connoisseurs. As the modern and contemporary art prices skyrocketed, with new price records at almost every auction sale, wealth became yet another barrier to enter the art market. At the same time, it attracted professional investors from the financial field and propelled art to an asset class of its own.

The Art Exchange is the brainchild of the art world and finance professionals with a significant track record. We joined forces to create a financial tool aimed at increasing the efficiency and transparency of the art market without “disrupting” or “fixing” it.

We believe that art trade is part of the global financial market and that traditional mechanisms such as hedging should be available to all. Derivatives make the financial market more efficient, transparent and decrease dependency on the central counterparties. The derivative market is the largest in the world and counts 10 times the global GDP. The Art Exchange introduces derivatives on art that allow one to take the desired exposure in any size but also to hedge desired risks.

Our mechanism of fractional ownership was conceptualized both to address the illiquidity and lower the entry barriers. By maximizing the participation in the art market, we open it to classical supply, demand and price discovery mechanisms.

The Art Exchange stands for collaboration and joint efforts. Inspired by the advances of decentralized finance, we invest in infrastructure like oracles on Ethereum blockchain to facilitate initiatives around fine art. Our decentralized solutions can seamlessly transfer the auction prices to the blockchain. This distributed, secure data can be accessed by startups, third party projects and protocols to build financial products, prediction markets and much more. The Art Exchange believes that the collective efforts will propel a more transparent and efficient art market.

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