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How to value CryptoPunks

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DappRadar

What’s your collection worth?

A CryptoPunks value estimator has arrived!

The start of 2021 has been exciting for non-fungible tokens (NFTs) and has already been marked by impressive sales. For instance, multiple CryptoPunks sales and bid value have already surpassed $100,000. 

While some users might question the value of small pixelated faces, others argue the price will be even higher in the near future. NFT valuation is a complicated and complex topic, as such, it is vital to understand the key metrics to consider while valuing NFTs.

Within this overview, the size of the collection, attributes, importance of top CryptoPunks owners, and liquidity will be considered.

Contents

  • Key takeaways
  • Value concept by NFTs by type
  • The law of supply and demand
  • The rarity of the collection
  • The importance of whale activity
  • The liquidity of the collection
  • DappRadar CryptoPunks valuation tool
  • In-summary

Key takeaways

  • Recent Cryptopunk sales of over $100,000 started to show the real potential of the NFT collection.
  • The key factors creating value for collectibles are considered to be the size of the collection, attributes, and liquidity.
  • Each of these elements creates complexity within the NFT sector and has resulted in an increased need for accurate valuation tools.

Value concept by NFT type

Looking back, the first collectible dapp was CryptoPunks, which was built on the ERC-20 standard. However, the current NFT standard – ERC-721 – gained popularity with CryptoKitties. CryptoKitties kicked off the first wave of hype In the collectibles category in late 2017.

The number of use cases for NFTs is growing and given the nascent state of the technology we are likely to see more in 2021 and beyond. The key areas to-date have been art, collectibles, in-game items, virtual worlds, tokenized real-world items, and permission gateways.

Each NFT type has its own identifiers. Some factors are important for collectibles, whereas art NFTs have different metrics to consider.

CryptoPunks are collectibles, therefore, the most important metrics when considering the value of collectibles are the size of the collection, attributes, and liquidity. 

The law of supply and demand

The law of supply and demand plays an important role in determining the value of a collectible. As collecting trends change, the demand for an item also changes. It can become more in demand, forcing prices upward, or in less demand, causing prices to drop.

CryptoPunks was the first-ever NFT collection, with a limited supply of 10,000, each with its own unique attributes. Although the collection was distributed more than three years ago, the real potential became more obvious in 2020.

Interestingly, many punks belong to wallet addresses that haven’t moved any assets in 3+ years. Many of these likely represent CryptoPunks lost in the ether, making the supply even more scarce.

Source: CryptoPunks

Limited supply is one of the key elements to consider while valuing CryptoPunks and other collectibles. 

Source: Twitter

The rarity of the collection

There are five types of punks in CryptoPunks: Alien, Ape, Zombie, Female, and Male. Alien punks are the rarest ones – only 9 exist; while male CryptoPunks are the most common ones.

Source: CryptoPunks

Interestingly, the most uncommon alien punks do not hold any sales records, and while it could be difficult to value an alien punk. Recently there were a couple of bids for 180 ETH (around $200,000) which were not accepted. 

Source: CryptoPunks

CryptoPunks type is just one factor that makes the collection special. There are more than 80 attributes rated from rarest to common. As much as the uniqueness of an attribute matters, the count of attributes is another important factor.

Source: CryptoPunks

For example, let’s consider the top sale for CryptoPunks. Punk ID 3307 sold for 190 ETH on the 30th of December 2020. The Punk belongs to the Male type with a 0 attribute count. Although the male punks are common by type, the attributes count is one of the rarest. 

While valuing CryptoPunks it is important to check not only the type but the uniqueness of the attributes together with the attributes count.

The importance of whale activity

Recently, the second-largest owner of CryptoPunks popped back up to sell a few punks. The wallet was well-known for owning 703 CryptoPunks and has not been active for three years, until last weekend.

The owner accepted a couple of bids that were underrated. For instance, CryptoPunk #6876 with the attribute of Buck Teeth was sold for 4 ETH while the floor price 34.99 ETH.

Source: CryptoPunks

The event was quickly spotted by other NFTs investors. On Twitter, Justin Trimble suggested buying the collection for $750,000. While the true value could be considerably higher. 

After evaluating the collection by simply multiplying the current punk floor price ($5.7k at the time of writing) by 699 punks the collection’s estimated worth is $4 million. On the other hand, the collection has quite rare punks that might double the value to $8 million.

It could be argued that the listing for sale of 699 CryptoPunks simultaneously might drastically decrease the value of CryptoPunks, at least in the short term. That is why the activity of whale NFT owners is an important factor when valuing CryptoPunks.

Liquidity of the collection

Another element to consider is the liquidity of NFTs. Once the price of the collection increases, liquidity decreases. In the long term, liquidity plays an important role as investors might need to convert NFTs into fungible tokens quickly.

A platform named NFTfi made it easy to borrow fungible tokens against collectibles as long as there are users eager to lend. Users can easily put any type of NFTs as collateral for a loan with optimal conditions. While the lenders might propose different ones.

In this way, NFTfi represents a type of peer-to-peer lending platform where the lender and borrower can virtually negotiate the loan conditions.

Source: NFTfi.com

Another platform to consider is NFTX. Their general idea is to create pools of similar NFTs (e.g. CryptoPunks); each pool represented by its own ERC20 backed 1:1 with the NFTs in the pool. Users can deposit an acceptable NFT into the pool and get an ERC20 in return representing their contribution. 

Source: NFTX

Both platforms are trying to solve an ongoing issue of liquidity in the NFT space. It is suggested that if they acheive this goal then an increase in the liquidity of collectibles will result in increased valuations.

DappRadar NFT Value Estimator

Despite the key-value elements described here, NFTs are notoriously difficult assets to price. Undoubtedly, there is a huge need for valuation tools to serve NFT owners and traders.

A new product on the DappRadar Hub in 2021 is the NFT Value Estimator. Currently, still in Beta mode, the purpose of the tool is to give NFT holders an indication of the value of their NFTs. At this stage, it supports only CryptoPunks but more NFTs will be added for estimation very soon. 

In-summary

To conclude, NFT valuation is a very complex and challenging topic as valuations differ by the type of NFT. Whilst certain factors are essential for collectibles, art NFTs have different metrics to consider.

The most important factors when valuing collectibles could be the size of the collection, attributes and types, and liquidity. 

CryptoPunks owners can use the NFT Value Estimator tool on DappRadar to gauge the value of their current collection.

The amount of information required in order to value NFTs is still considerable and hard to pull together. That is why we observe an increasing need for NFT valuation tools such as the DappRadar NFT Estimator.

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