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NBA Top Shots
Macro alpha and micro alpha for NFTs
In my dive into the NFT world, I’ve gravitated towards art, not focusing much on in-game items or sports cards, mainly because I don’t particularly enjoy them. But I understand there’s value in it.
NBA Top Shots has been consistently one of the platforms with the highest sales. I don’t particularly care about basketball. But one of my business partners is completely addicted to it.
So we decide to go ahead and try to build a portfolio in NTS too.
The macro thesis for NBA Top Shots is clear:
Basketball is becoming a global sport. Its appeal is getting wider. It’s the foundation of Chamath’s thesis for buying a piece of the Warriors
NFTs and digital goods are getting wider acceptance
So this is “macro alpha” — getting into an area where you identify a macro trend
The micro thesis is more fluid and evolves with the game: once you identify the alpha, what to buy?
There are two basic kinds of cards in NTS: limited and unlimited. Limited cards are explicitly 1 of X (10k for example) and have scarcity. Unlimited cards can be minted with every new drop.
My thinking, knowing nothing about basketball, but believing the macro thesis, is that you should accumulate a portfolio of these scarce assets.
But this portfolio can be greatly improved if you have a view on “basketball futures” — i.e. which player is under or overvalued at the moment?
The total alpha will be generated by applying together with the macro thesis + applying a view on basketball futures to buy cheap value and sell overvalued itens
Our main strategy (at the moment) is the following:
flip/trade unlimited cards and hold a portfolio of limited cards, preferably with value to unlock.
trade limited only if we need the cash to buy another limited with equal or greater potential — ie. expected return or better risk-adjusted return, due to diversification.
This is an evolving strategy, and I plan to keep sharing this is a learning experience for both me and my business partner.
Ping me on Twitter if you have any suggestions or if you think there’s any flaw in our thinking. Would love to be corrected.