Correctly Priced NFTs
Breaking down the correction in the prices people are paying for NFTs...
In today’s edition of the Ground Floor we will be breaking down the ever evolving prices people are willing to pay for NFTs in 2023...
Correctly Priced NFTs
We often evaluate floor prices to get a sense of how successful a Web3 project is.
In the last 6 months, however, despite very positive developments from a number of the leading NFT projects ~ floor prices have continuously declined.
This raises the question, whats' driving the floor prices of Web3 projects?
At peak prices ~ people were paying upwards of $420,000 for a BAYC, and upwards of $68,000 to purchase a floor priced Doodle.
During this time, it was unclear what value collectors would receive from owning one of these assets, however, this didn't prevent collectors from using their imaginations to speculate on the benefits they would receive should their favorite Web3 brand succeed.
While BAYC holders have received a bounty of benefits in the form of valuable airdrops ~ during this same time, it has also become clear that the far majority of NFT collections cannot live up to the expectations collectors once held.
Veblen goods are products that become more valuable as they become more expensive.
This attribution of value to expensive goods has played a central role in the rapid price appreciation of certain NFT collections, and it also aids our understanding of why there's less demand for NFTs when they're on sale for 80% off there all time high floor prices.
Let's examine Doodles
With profile picture projects occupying the most valuable digital real estate on social media, when collections such as Doodles rapidly rose in price, owning one of these assets allowed people to communicate with crypto Twitter that they own an expensive digital asset.
As the cost of owning a Doodle increased, so did its value as a status symbol.
This phenomenon works both ways.
As the floor price of Doodles declined, so did its value as a status symbol.
Observing this phenomenon at work, NFT collections such as Doodles are less valuable as they drop in price, hence there's less demand for Doodles at $5,000 vs $68,000.
Whereas once there was a long list of projects that commanded very premium prices and were considered "bluechips" by the NFT community, this list has significantly shrunk in size.
Y00ts, Azuki & BAYC are some of the only remaining projects that are commonly called Bluechip projects in April 2023, with each of these projects having something in common.
Y00ts lead by FrankDeGods has mastered the art of positively engaging with people on Twitter and embodies the ideal brand ambassador, Azuki has hired people such as Wale who's content receives millions of monthly impressions on Twitter, and BAYC continues to create new narratives to engage their token holders.
To date, each of these projects have demonstrated a deep understanding of the value of attention and positive brand association, in addition to possessing a unique ability to create a perpetual sense of suspense that something new is coming soon.
📡 Looking Forward
High priced NFTs can attract people with deep pockets into Web3, however, what the Web3 world lacks today is products at accessible price points that provide thousands, and in time millions of new consumers with a reason to own NFTs.
As we see more companies create compelling products at lower price points, it looks likely we will see the prices of many NFT collections continue to decline as collectors have better reference points to re-evaluate the lack of value they receive from existing NFT collections.
This re-pricing of NFTs has been accelerated by the arrival of Blur, however, we shouldn't confuse these falling floor prices with the success of NFTs.
💡 Web3 Roundup
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See you next time! — OB1👋
This newsletter is for informational purposes only and does not constitute financial or business advice to any person or entity.