The hand — how salty is the OpenSea

TLDR:

  • NFT collections have overperformed the overall market during the recent crypto carnage
  • Asset liquidity depends on the life-cycle of the collection
  • V1 will have indicative prices updated daily for all assets in Autoglyphs, CryptoPunks, Meebits, Bored Ape Yacht Club, Bored Ape Kennel Club, Solana Monkey Business, World of Women, Space Runners, MindFolk.

A month has passed and we progressed further with our NFT Evaluation Machine which we’ll call George from now on. How is George doing in his existential poker game? Let’s frame it first — every time a hand is dealt it’s judged versus the whole wide universe. The probability of having this particular hand is measured against all other possible combinations in a usual “if we had infinite time and an infinite amount of hands — this would be the best strategy”. Similarly, we would collect all possible NFT collections available on and off-chain and would look into all possible variations of features. But we live in a finite world and we have to keep things practical and sometimes play a flat tire!

So, how salty is the OpenSea? The answer is it’s like the Baltic sea — extra salty with a generous splash of toxicity in it but it’s home sweet home! Multiple collections are not liquid but with superb spots of liquidity in certain areas.

To keep things manageable we’ll look at several major and among the most popular collections: Autoglyphs, CryptoPunks(CP), Meebits(MB), Bored Ape Yacht Club(BAYC), Bored Ape Kennel Club(BAKC), Solana Monkey Business(SMB), World of Women(WoW), Space Runners(SR) and MindFolk(MF).

BAYC and WoW are some of the most liquid collections with CP and BAKC falling shortly behind (plot above). An ideal for a collateralized loan would come from a collection with a higher percentage of assets having multiple trades (more than 2). It signals an existence of a deep and liquid secondary market. The plot above shows the share of assets in each collection that has more than two trades since being minted (secondary), only one trade (primary), and with no trades at all (minted). Surprisingly, Autoglyphs do not have as deep a secondary market as you would expect despite being close to the oldest collection (CP is the oldest) and having a reasonable amount of traction. Overall, we see that from 10% to 60% of assets in each collection have not yet found the right price to be sold for! Assets within collections are not always minted at the same time and their peek hype moments rarely match between collections. To offset these features, let’s unpack them on the time dimension.

Two distinct trends appear:

  • Overall market sentiment where we see upticks in trading on 2021–08 and 2022–01 across all collection
  • Collection level trends where SR collection is accelerating in activity due to being minted on 2021–12 (other smaller vintages are excluded — do not influence results). Similar earlier peeking in activity for others

On the other hand, market breadth in our previous favorites (BAYC and CP) is highly concentrated in several assets while WoW shows more dispersed liquidity. The upper section of the plot above shows the number of trades per collection normalized (w.r.t collection size) by month. The lower section shows the number of assets traded within each month. We look at the number of trades taking place by the month only for active assets in the secondary market — a good proxy of liquidity variation by time. The second row shows the number of distinct assets traded by month as a proxy for the liquidity breadth within the collection. Numbers are normalized by the total assets within the collection. Mindfolk collection is excluded. Overall, on average only a small percentage of assets within each collection are liquid on a monthly level.

So what? Overall market sentiment has a strong impact on NFT market liquidity, and even during the most active months — only up to 30% of collection assets are liquid to trade. Broad collection liquidity varies by collection tenure and overall peak-hype point with the number of liquid assets deviating from 20% to 60%. What happens if we look at individual assets within each collection? We’ll cover it in the flop piece where we’ll arm up George with AI vision.

During the recent carnage in the crypto space, a few news pieces floated about how NFT space was resilient and substantially overperforming the remainder of the space. Most of the arguments were driven by the observation of increasing market capitalization of all NFT collections. Our George, despite being in an early stage with insights comparable to what would be expected from an intern, did some accounting and modeling to construct overall collection indices and would agree with the claim! Except, we are comparing apples to apples here (individual collection value indices in EUR normalized on 2021–12–01 to be 100).

BTC in EUR (the dark black line) is at the lowest level signaling that 100 EUR at the beginning of December allocated to BTC would be worth only around 40 now. At the same time, allocation to any other covered collection would be worth between 55 to 90. WoW is the best performing one for anyone trying to decode the legend. Ambiguity is deliberate as improved weighting schemes within each collection (here we tested a uniform one) can achieve superior results.

We’ll bring these indices into production mode in the middle of February, so you can have a more in-depth look at them. Asset-level price series will come out in the turn piece where we’ll arm George with the ability to haggle for a decent price.

That’s a wrap for now. If we’ll have time in the meantime — we might set up a telegram/Twitter account for George and teach him how to verse in DeFi space lingo! As usual, these are early prototype results with everything in motion and subject to change/improvements/revisions.

Part 1 The shuffle the prelude of our evaluation machine

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