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In “How to Value NFTs” we have speakers:
- Mitchell Moos, Crypto Briefing- Moderator
- Skirmantas Junuskas, DappRadar,
- Alex Svanevik, Nansen, Blockchain Analytics Platform
- Kyle Samani, Multicoin Capital, Crypto Investment Firm
How do we value our NFTs in our collection? What makes one NFT more valuable than another within the collection? How do I pick valuable NFT collections?
All important questions to reflect on as NFT traders. Most traders are looking to extract value from their collection, not simply just collect. To extract this value, first, we need to understand what the value is!
Why Should People Get into NFTs?
First, the entry into NFTs isn’t as scary as you’d think. Skirmantas Junuskas describes his experience in CSGO as similar, ” Everyone finds a way into NFTs differently. CSGO skins, gaming skins, etc. were a big interest of mine pre-NFTs. NFTs are the same idea except decentralized. I own it and they can’t take it away from me”.
Kyle Samani further explained the reason people should make this jump “People are spending an increasing amount of time online. Now we put more stake into our online profiles. COVID was the catalyst that pushed more people to spend more time online. We are just at the beginning of the turning point. NFTs are a way to represent yourself online”
What Brings Digital Goods Value?
In June of 2021, the largest CSGO transaction took place:
Break news : Today the largest transaction in the history of CSGO Trade has taken place
780k $ in one deal .face to face deal pic.twitter.com/wJm3E8NMmo
— Kirito(Buy/Sell Buff Balance, Cryptos) (@KiritoTrade) June 19, 2021
But with transactions like this happening daily in the NFT world, why do people perceive the value differently? Junuskas explains the difference as a difference in investment. You don’t really own skins in video games. If you quit, your pockets are empty. If they shut down your account, your pockets are empty. When buying NFTs, you can liquidate or walk away at any point and have something to show for it.
Alex Svanevik explains that people are spending more on NFTs because there is true and permanent ownership. There is a high liquidity premium that allows people to buy and sell with ease. There is a lot of confusion surrounding the value of NFTs to people outside the space, but Svanevik explains the reasoning. With such a high liquidity premium, any NFT can be bought or sold at any moment. Physical goods on the other hand are difficult to transfer. This adds to the liquidity premium of digital goods and increases their value.
Furthermore, Samani states that reach is the most important aspect in understanding the value of these assets. Sure you can show off physical goods on social media in some capacity to friends and family. And can show off the same goods in person. But with digital assets, the owner can go into any server or chatroom and display their wealth. You can’t reach the same amount of people showing off your Rolex in person, vs showing off a CryptoPunk online.
What Makes a Valuable NFT?
Svanevik explains that the community uses the term NFT too broadly. When looking at collections as a whole and valuing them, either positively or more specifically negatively:
“When people talk about NFTs negatively, they are talking about pfps usually. The long term bold case for NFTs is that they make everything, digital or not, an investible asset. The future is extremely bright, but the categorization is so wide. Can be gaming, metaverse, pfp, etc. Probably not super sustainable to have very highly priced pfps that are easy to replicate. NFTs as a category have a lot of long term viability.”
But what makes quality projects stand out from the rest of the replicated garbage we see released daily?
Salmani states: “A quality and unique Shelling Point”
This is otherwise a simple way to conceptualize complicated topics. How would you explain the metaverse to your grandma or mom? Show them Ready Player One. It is a way to explain an abstract point in a digestible way. A couple of examples are the ConstitutionDAO and CryptoPunks.
Svanevik ended the session with a point on the collections that make them stand out from the rest as we go on. “Social elements are important. Who’s owned it, when they owned it, what is rare and what isn’t. That is what sets NFTs apart from others. Also providing value past just the art of the collection”
The utility provided should be one of the focuses when valuing NFT collections, now and in the future.
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