I’m a Top Shot investor and a collector, but recently, I’ve felt more like a gambler. The combination of operating with a short-term mindset and constant FOMO is the perfect recipe to get crushed by the market.
It’s time to recalibrate.
The following Top Shot tips are reminders for myself, but there should be value for everyone. I’ll start with tips that apply to general investing, then roll into Top Shot specifics.
#1 – Spend Only What You Can Afford to Lose
Each time the Top Shot market pulls back, I’m tempted to invest more because of my conviction in Top Shot. Even worse? I went out of my way to make sure my Top Shot account got to the 1% percentile according to the Evaluate and MomentRanks valuation tools.
Don’t spend money you can’t afford to lose. It’s universal advice, but even more important with digital collectibles. I don’t want to miss out on more market growth, but it’s irrational to spend more.
Crypto-related projects have the potential for huge returns because there’s a ton of risk. Digital collectibles and currencies are new stores of value without a substantial track record. Volatility is inevitable.
NBA Top Shot seems like a better version of paper cards. Bitcoin seems like a better version of gold. I’ve invested under the premise that both digital assets continue to grow. But if I’m wrong? I’ll still be able to eat. I’m playing with money that I can afford to lose.
#2 – Buy Moments You’ll Keep For a Year
Last week, I bought lots of Series 2 #15,000 moments intending to hold the moments for just a few days. My thinking? New users would come onto the platform over All-Star weekend and there wouldn’t be enough supply for everyone. I had no long-term faith in these moments and just wanted a quick flip, but it blew up in my face.
New rule: I won’t buy a moment unless I’m comfortable holding it for at least a year. Buying to flip probably won’t work as intended. Buy moments that you like. Don’t chase profits.
If you own a moment you like, then the market tanks, you’ve got a nice moment in your collection. You might’ve overpaid, but you can live with it.
The other problem with frequent selling? The 5% Dapper transaction fee. Just to break even, the moment needs to increase in value by 5%. A 5% increase was easy when the market was growing by 100% per week, but that was never sustainable growth.
#3 – Take Money Off The Table
I believe that Top Shot will be a gigantic platform because it’ll take chunks of the market away from physical cards, fantasy, betting, and even video games (2K MyTeam).
But there’s a chance Top Shot disappears after the initial hype because it’s just a startup.
- New competitors. (Top Shot is MySpace?)
- Top Shot makes poor supply decisions.
- There’s a better AR or VR version of moments and Top Shot doesn’t innovate.
- NBA viewership continues to decline. Moments won’t have value if the NBA loses its relevance.
- The Top Shot market is growing too quickly and needs a huge correction.
We’re in the middle of a huge cycle where all crypto projects are experiencing high growth. Is Top Shot just riding the crypto wave? I’m confident that Top Shot will navigate potential roadblocks, but there are no certainties.
All of this to say: don’t be afraid to take money off the table if you’ve made huge profits,
Two weeks ago, my initial investment was up over 500%. I considered selling a few moments, but I hated the idea because of my long-term conviction. Plus, how can I tell friends that Top Shot will be bigger than physical cards while selling moments simultaneously?
That was a stupid way to think.
You can have concerns about Top Shot’s risks while maintaining a positive long-term outlook. Taking money off the table if you’re heavily invested is smart risk management. Everything may disappear, so mitigate the risk.
Not only will your risk be lowered with less skin in the game, but you’ll also see the market more rationally. I’ve felt much better since taking half of my original investment off the table.
#4 – Think At Least A Month Out
Almost a million moments hit the marketplace last weekend, and close to a million more moments will be pumped into the economy in the next few days (Cool Cats Drop 3 and Pre-Order Base pack).
When new users want their favorite players and can’t get packs, they have no choice but to pay high prices for Common Series 2 moments. But with an increased supply, new collectors should be able to get their favorite players at a reasonable price.
Will the price of the Series 2 Common moments bounce back after plummeting more than 50%? Maybe. But remember, Top Shot has said that base packs should always be available. When base packs become available on-demand, the moments in the pack won’t return a profit. We’ll eventually have a marketplace with $2 base moments, which will be healthy for the Top Shot economy.
If break-even base packs are the end-game, at what supply level does it happen? If non-star players with #35,000 moments sell in the $50 range, the solution will be to increase the mint size to #50,000 or pump out #35,000 moments at a higher velocity.
Series 2 isn’t a done deal. Top Shot can increase the supply of Series 2 base packs until the packs stop selling out. If a player has 20 Series 2 Common moments, will #35,000 moments hold long-term value? I doubt it.
Top Shot won’t ruin the supply for the Rare or Legendary moments, but if Common moments are meant to be accessible to everyone, what’s stopping them from minting millions more?
Top Shot can’t mint more Series 1 moments, which removes the guesswork. But there still too many unknowns in Series 2 to invest confidently.
Another thing to keep in mind: Top Shot changed the edition sizes for Series 2:
Rare: 500 – 4,999
Legendary: 50 – 499
A Standard tier is coming, which should fit into the 5,000-9,999 range. A Standard tier will make the Series 2 Common moments look worse than they do currently.
#5 – Use Market Caps to Your Advantage
A moment’s market cap is the price it’d cost to buy the entire supply of the moment.
Multiply a moment’s supply, by the lowest ask price to get an estimated market cap for each moment.
Example: $1,200 lowest ask x 1,500 supply = $1,800,000 market cap
It’s easy math, but there are great tools, like Evaluate.market, that calculate each moment’s market cap for you.
Market cap is simple, but it’s misunderstood by lots of newcomers. Two $40 moments aren’t equal when one moment has a supply of 1,500, while the other has a 2,500 supply.
How can you use a moment’s market cap to your advantage?
It’s a good way to find irregularities in the market.
When a player has the same moment in multiple tiers, the market caps across tiers should be similar or skew in favor of the more rare moments.
Almost universally, Series 1 Common moments have a 50% or higher market cap than the Metallic Gold counterpart. This is a strange disconnect and possible inefficiency.
Let’s look at Luka Dončić’s first moment:
Common: $6,250 x 1,431 supply = $8,943,750
Metallic Gold: $18,777 x 299 supply = $5,614,323
Holo MMXX: $88,000 x 50 supply = $4,444,400
Cosmic: $150,000 x 49 supply = $7,350,000
Either Common moments are overpriced or the more rare moments underpriced.
Why does this happen?
Common moments are the most accessible moments and provide more liquidity. But once the market matures with more true collectors coming on board, Metallic Gold, Cosmic, and Holo moments should rise to the level of the Common moments. If I had to bet? Metallic Gold moments will surpass Common in long-term value.
A player’s first moment will get a special badge, and unless the highlight is lame, it should be the player’s most valuable moment.
Let’s look at Luka Dončić again:
1st Common Moment: $6,250 x 1,431 supply = $8,943,750
2nd Common Moment: $2,629 x 3,524 supply = $9,264,596
Both moments have a similar market cap, meaning Luka’s “first moment” appears to be undervalued.
The price of a moment will increase when it’s part of a challenge, but a moment’s true value (price after challenge finish date) can be guesstimated by comparing to other Series 2 moments with a similar circulating supply.
Once you know the true value of each moment in the challenge, play around with the percentage of collectors who will complete the challenge (Example: 76% completed Cool Cats 1, 80% completed Cool Cats 2, 71% completed The Gift) to find the rough mint number of the reward.
Then, use the reward’s estimated mint amount to gauge its appropriate price. Add together the true values for each moment in the challenge, and add it to the estimated price of the reward moment to see if the challenge is worth going for.