----Originally written in late Jan 2022---
I have slightly updated this article to not read as today’s prices as I originally posted this in late January. The example figures are mostly for demonstration and to illustrate percentage growth, so please be aware they are not correct for April when this is posted on Pairology
Hello again all old and new Veve collectors! I wanted to write up a long form article focused on the question of how much we should consider rarity when making purchases and assessing where the best gains could be made in the long run. I decided to write this article primarily targetting people who are new to the space and want to get some ideas and perspectives but I hope everyone can gain something from reading.
TLDR at the bottom if you want a brief overview and not a long form piece
Please note these are my personal thoughts and opinions and not financial advice. VeVe is a young project and as with any investment there are risks to consider. VeVe NFT’s are volatile assets that can move (price wise) rapidly up during bullish periods and have heavy retracements during downtrends, this is fairly standard with a newer asset class that has not established value. You should consider a range of opinions and data and make decisions based on your own research and convictions that make sense for you. I can’t predict the future, I just look at trends, try to make informed guesses, and consider things that could effect long term price growth.
I am also working under the premise that VeVe continues to grow and the project becomes more mainstream and this reflects in sales volume growing over time.
1. I’m new, what might be worth considering?
If you are new to the space and watch any videos or see tweets regarding VeVe, there is a huge focus on some of the “grails” which are iconic that often come in the form of Ultra Rare or Secret Rare collectibles. This is understandable as they are iconic items and will likely hold some of the highest values in the long term provided VeVe has the future growth it appears they can today. They’re signature pieces and holders want to show them off.
These items often have extremely high floor prices (considering average incomes of the majority of people) although this is much more reasonable (01/04/22) due to the recent downtrend. Many are still out of reach of average retail investors. Ultimately, these pieces should reach the highest values on paper, but let’s consider potential growth of price by percentage and consider an alternative approach to purchasing if you want to maximise returns.
2. Floor price gain vs percentage gain
Let’s look at “Spider-Man – Ultimate Animated” (Secret Rare/1000 Editions) and compare it to “Spider-Man – The Amazing Spider-Man” (Common/32,000 Editions). Both are from the same set and are one of the most popular sets as they are first marvel drops ever and the first spider-man drops ever in NFT form. Based on this, the long term ATH price for the SR will probably be higher than comparable sets, but we can still make an interesting case using these examples.
There has been a lot of speculation as to the final value of the secret rare Spider-Man. You will often hear $1,000,000 as a number, this seems reasonable if the project is successful and breaks into the mainstream over the coming years. Let’s also consider it could go higher than $1M (and probably will), but use this number as a conservative target for the long term considering it’s current price.
Lets consider the purchase prices for both. This article was posted in January originally so prices are different today, but I will use these figures as the principals are the same, SR is was at $85,000 and common was at around $1k. Therefore, if you had the money to buy an SR you could alternatively buy around 55 (rough calculation) of the common edition as prices are not all set at floor price of around $1k (average was around $1.5k). This doesn’t mean you have to buy 55 editions to make a good return, just that price difference is roughly 55:1 common to SR (85:1 if all items are listed at same as floor price).
Let’s take the $1,000,000 target and assume price will scale similarly for the common. The scaling of the SR would be 11.7x of the floor at the date these prices were recorded of 85k to reach a floor of $1,000,000. This would put the common price at $11,700, assuming that the scaling remains in line with current price difference between common and SR.
What could affect price scaling within sets?
So, $11,700 is a high number to consider, but lets assume app users grow 11.7x then theoretically this shouldn’t be an impossible figure to reach (especially as the app is not yet mainstream). We have to consider how many of those new users can afford a collectible at this price. You would need to see more than 11.7x growth in reality to make this price a reality, as the price is still quite high and not all of those new users will be able to afford one.
Consider now how many of the users coming on board will have $1,000,000 to invest in a digital collectible vs how many new users could afford a $11,700 collectible. I would assume there will be many people priced out of the SR, but the common will still be opportunity to buy an FA Spider-Man. It’s still pretty rare assuming there is a day when there are 100’s of millions of people on the app.
If prices reach $1M you can assume there will be a drop off in price growth potential for the SR. Yes, the collectible could reach $10M, but this would represent only another 10x growth. Let’s say we do reach this price, then there would have been 117x growth from the prices I have given and the price of the common would be $117,000 (if these prices between common and SR scale at the same rate).
I would wager that there will be significantly more users able to consider a common at this price vs those who could even afford an SR. This should help to level out the scaling to some extent as demand for a common grows at a faster rate than SR simply due to entry price. In January there was an 87x difference in price between common and SR, I would make the case that eventually as user base grows that this will come down somewhat as there is only a 32x difference when considering edition sizes. The SR is animated though which will add value vs common, but lets take a number somewhere between 87x and 32x as an example.
Let’s use 50x as an example. If we assume SR price of $1M again and see what 1/50 of this would be we come to $20,000 for floor price for the common. If we then consider you sell your 55 commons you bought instead, and assume the average price ends up as $22,000 (if you put some price gaps between pieces), this would mean the total value comes to $1,210,000 which represents a 21% difference and $210,000 more profit. We can scale the price up and down, but percentage wise it still shows there is potential for faster price percentage gains with a common if you are stacking.
This is a hypothetical argument and relies on price guesses, but it demonstrates that commons could still have excellent long term value and potentially more profitability unless current price scaling remains the same or decreases. It’s likely going to be a quicker process to get from $1,000 to $11.7-22k than $85,000 to $1M outside of FOMO prices. Also this Spider-Man example will not be exactly the same due to it’s significance, but there are currently some iconic characters/IP commons that are selling on the market close below or close to drop price that could see massive growth for the future.
3. Factor in asset liquidity to your thinking
Basic example of differences in liquidity of assets
An easy example of highly liquid assets and low liquidity assets would be considering cash and housing. You can go to any shop, any place and there will be a demand for your cash. You can spend it on almost anything and anywhere and it's the easiest thing to trade with (if you think of it as an asset). Housing on the other hand, although it will always have demand, requires hundreds of thousands of dollars to purchase. Selling a house will net you a huge lump sum, but it could take months to sell due to it’s high price and demand. Cash on the other hand you can trade for goods, services, items, anything in seconds. If you have $500,000 of cash or a $500,000 house your net worth is 1:1, but the cash can be sold for other goods much faster. Cash value does not grow in value like a house does, but it is very easy to trade with quickly for other goods.
Liquidity of VeVe collectibles
OK, so I gave some examples and theoretical examples of what could happen with prices and scaling. Let’s now assume scaling remains exactly the same as today so you make 1:1 profit regardless of whether you buy $85k worth of commons or one SR.
Let’s now consider Spider-Man SR against Common again in terms of liquidity. Let’s assume you have one SR and the price hits $1M. You have the same value amount of commons. Which is likely to return it’s potential value fastest? There will be a much larger amount of people able to consider a $12k purchase vs $1M. This is just simply due to floor price and demand vs supply. Demand will be a lot lower for the most expensive items as most people cannot afford them meaning a sale will take longer. A cheaper item that has seen the same growth but you have multiple editions of can be sold quicker.
Also, consider you have a need for urgent liquidity, say for example a family member requires an expensive surgery, it would be best to have more items of a liquid asset that you can sell fast to reclaim your investment and any profits vs an asset that could take months to sell.
Currently the collectible Donny demonstrates this. It’s floor price is extremely high, but it’s price is already so high that many people entering the space will never consider it a viable option and the time between each sale is often quite long. If you have 11 Todd McFarlane Batman’s at 12.3k floor vs 1 donny at 139k (so roughly the same total value) I would expect you could sell the Todd’s much quicker and easier as they are lower liquidity items. Essentially, popularity of item does matter, and highest value of an item alone doesn’t make it the best pick up necessarily, especially if you want quicker assess to funds.
4. Conclusion and takeaways
This piece isn’t an argument against buying SR’s and UR’s.
Iconic and rare items will always be the most likely to hold the highest value and are safest to buy into if you have the funds to do so. On the other hand, if you are new and thinking you can’t make substantial gains on the lower priced commons/uncommons, I believe you may be missing out on some great purchases at low prices! I believe this may be the case to an even greater extent with comics, although users are starting to see their value. As user growth increases and the majority of people don’t have $100k to spend on an item, you can expect popular commons to have excellent profitability. If you can’t afford the most expensive Ferarri, but you can still buy a lower priced Ferrari, a lot of people are still going to want to buy one.
You also have to consider your initial investment and how much you can afford.
I believe you can still invest in lower priced items today and make higher ROI without having to put your entire net worth into just one piece. If everyone has already priced in the value of the best pieces, consider if there are items that are undervalued (especially of popular IP).
Some common rarity items are unique and are relatively low mints
Some items listed as common are unique and valuable such as Elsa or Todd Batman and could hold values close to secret rare items, and in some cases far beyond. Although they have higher mints than most SR’s they are iconic pieces in their own right and prices are starting to reflect this. Disney’s Golden Moment items are a good example and have seen strong growth recently.
The best commons can be stacked and see excellent value going forward.
This also applies to uncommons and rare items that are undervalued. As users grow these pieces will have their moments of strong price growth. Consider today what might be valuable in the future especially as demand is growing and supply is fixed. You can just as easily make money stacking one excellent common than you could with an SR that has low demand.
Not all commons will necessarily be as valuable as others
You want to consider which common items have good design, popularity with large audiences, are first edition/appearances etc. You can often tell quality common items by how much their price deteriorates during a growth cycle. A good item may gain 400% value and then lose 20% of this value in a sell off/gem squeeze. A less popular item will be more likely to see higher losses of gains or even prices returning to floor during a gem squeeze/selling period.
First Appearance/Edition items
FA/FE items for popular IP and characters will see excellent growth regardless of rarity. You may miss great opportunities if you consider in the long run they may be an FA or a 40 season collectible drop.
It will if you just look at highest floor price (in general), but it depends on your outlook for the future and how liquid you like your assets. There may be more potential gains on lower priced common items that are underpriced as they are overlooked and you can purchase more than one and stack them. There is huge user growth and many won’t be able to consider the SR items, a common today could see better % returns vs SR. Don’t overlook stacking excellent common/uncommon items if you feel the price is still undervalued and they will be popular with a wide audience. You also have a much more liquid asset that you can sell quickly. Lots of common items today are FA/FE and are still affordable to most. SR items of popular IP will always be worth a lot especially if they are FA/FE, but the entry price is steep. We’re still very early and some of the commons today still have room for excellent growth!
If you liked the content! Ideas and feedback always welcome.
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