Sizing NFT Collectibles' Market: Part 1
What’s the market cap of CryptoPunks?
I’ve been thinking about how to value the NFT collectible market, as part of my exercise to value the current market for NFTX.
The concept of market cap as I see it should actually be a lower bound for the actual market size, because many owners will not sell at the current mark price.
The way I like to visualize the market cap for this category is a power law, with CryptoPunks in one end, all the Runner-Ups (like Hashmasks, Autoglyphs etc) in the middle and a long tail of (almost) valueless assets.
To illustrate the different ways to think about market cap, let’s briefly discuss DTs.
There are 3 ways you could calculate market cap: using the latest transactions, using current bid prices, or using ask prices.
Latest Transactions: DTs never were transacted. 21*0 = 0
Current Bid: the current bid is 0.018 ETH (more expensive for me to accept the bid than the bid itself 😂). 0.018*21 = 0.378 ETH
Current Ask: The current price to corner the DT market is 10.5 ETH.
As you can see, given the illiquidity, there’s a large range to define market cap
CryptoPunks, being one of the most liquid NFTs, can be valued using the latest transactions method. We can interpret this as the lower bound for their value
The formula will be the following:
(Number of Punks for each type) * (average of the last recent transactions for each type)
Since different punks trade more or less depending on the type, I’m using the following rule:
Transactions that happened in the last month per type
Average of last 24 sales for Male Punks (excluding one 97ETH outlier) = 8.73 ETH
Avg. of last 24 sales for Female Punks = 13.88 ETH
Avg. of sales in the last month for Zombies (9 sales) = 83.08 ETH
Sale in the last month Apes = 140 ETH
Sale in the last month Aliens = 605 ETH
Note that there are higher current bids for both Aliens and Apes, but for this exercise, we will use sales as a lower bound.
Market Size per type:
Male: 6,039 * 8.73 = 52,725 ETH
Female: 3,840 * 13.88 = 53,291 ETH
Zombie: 88 * 83.08 = 7,311 ETH
Ape: 24 * 140 = 3,360 ETH
Alien: 9 * 605 = 5,445 ETH
Total CryptoPunk Market Size then is 122,123 ETH, $200M at current prices
It looks impressive for a collectible. But for context, this only is a bit higher than the current market cap of Badger DAO, a project that was launched less than 4 months ago.
Needless to say, i’ts also lower than the market cap of multiple ghost chains, and it wouldn’t be in the top 100 coins by market cap.
Doesn’t it seem low, given the amount of mindshare it occupies, for people in an industry that is booming like DeFi/Ethereum/Crypto?
I believe this market cap will rise. And CryptoPunks should be the first log, as Alex Gausman, founder of NFTX brilliantly puts:
We’ll increase the total market cap of NFT collectibles by increasing CryptoPunk market cap (and not DTs).
Having strong runner ups also helps, that’s why I think Hashmasks are so important.
Next, I want to take a stab at the calculation for Hashmasks and the rest of the curve.
If anyone wants to do it too, I can share your work here and on Twitter for visibility too. This should be a better exercise if done collectively.