[Issue 7]: Reflecting On A Month In Topshot, Part 1
What have I learned? And where is this Topshot thing going?
Hey everyone! After a long layoff, welcome back to the latest issue of The Dropshot…
I’m sorry for not posting frequently lately - if you’re a follower of NBA Topshot, you know that they last few weeks have been quite hectic. A surge of pack drops has caused a huge surge of new moments (and new copies of existing moments) to be issued into the marketplace. Combined with a slowdown in new user signups due to the pass of the previous “hype” cycle in late February, these confluence of events have caused prices in the marketplace to oscillate wildly based on news in the NBA, in the platform, and even the broader financial market.
I’ve been spending the last few weeks focusing on learning more from other great analysts and gurus of NBA Topshot on Twitter (e.g. Greg Murray, LG Doucet, @PlungeFather, and last but not least the hilarious @topshotanalytix) and watching the market for possible trendlines and patterns while more solidly deciding on my marketplace approach as it goes on its occasional roller-coasters. I’ll aim to change my (lack of) writing in the coming weeks, and focus more on “learning in public” more actively.
In that vein, today’s topic is reflecting on my past month in Topshot. The most recent heavy buying market occurred right after I joined Topshot, and it’s been fascinating (if a little stressful) to watch the wild undulations of the market. We’ve seen the highest highs, the lowest lows, and sometimes, just no trading at all due to marketplace maintenance!
Everyone loves lists, and in honor of Phil Jackson’s triangle offense, I will share three observations/trends/ruminations about three different topics: general marketplace behavior, how NBA-specific context can affect moment value and trends, and looking ahead to the future of Topshot. I will be breaking it up in to three parts — today is part one :) Hope you’re excited!
The Marketplace Moves Faster Than Flash
The #1 overall learning of the past month is that the largest asset in NBA Topshot is the ability to stay nimble in the marketplace and react to shifting tides. In the future, this will probably not remain true — the marketplace and platform itself will stabilize, with more structured release cycles and predictable market actions. Right now, though, users are interacting with and trying to predict behavior on a new platform in beta that is still actively trying to find it’s long term niche in several different markets (collectibles, cryptocurrency/blockchain, finance) with an actively growing user base with different goals. Some people are in Topshot to make quick buck, and some people basically Topshot as a second job. All of these user groups are equally important, but also equally unpredictable.
So instead of ripping your hair trying to figure out how to gain an “edge”, my painful learning has been that accept that nothing is predictable right now. Yet that simple realization brought me several moments of clarity about how to navigate the dynamics that I was witnessing in real-time in the marketplace.
High Serials vs. Low Serials
No hard data on hand to back this up at the moment, but a certain % of the marketplace buyers are naturally short-term traders who want to target moments at a low price, hold it for now more than a few hours to a few days, and sell it a higher price once it gets beyond a certain price threshold. If a moment sinks instead, they cut their losses and run to re-gain their liquidity.
This observation naturally leads to two conclusions:
Low serial number moments are great to buy and hold, but they’re not ideal if you want to maintain a degree of optionality. They’re naturally more expensive, and therefore not considered for purchase by a large segment of buyers
High serial number moments, especially for common moments with a high issue count, are a great tool for investing your money across many different players, teams, and series, which can help diversify your moment portfolio. Be prepared to pull the trigger and take profit from them when you see a better market opportunity — the value of your high-serial moment is at the pure mercy of the marketplace.
Your higher serial moments can be your first line of liquidation when you want to go chase a new moment that you like, or an expensive moment that’s seen better days, but you think is undervalued (or you just like).
Stay Liquid, Try Not To Be Foolish
A more surefire way to maintain optionality is to simply maintain some money in your Dapper balance account instead of deploying it in the market. This was a lesson that I had to learn the painful way, multiple times: when I first entered Topshot, I thought that any dollar sitting on the balance account was a dollar that could be accruing value in a massive bull market. This has obviously changed over time, and I’ve often found myself kicking myself for not keeping something in the chamber to jump on a great deal that I find listed on market. This is doubly tricky in a fast moving market like Topshot — even if I wanted to just bite the bullet and add more funds to my account to buy a good deal, the “good deal” will probably be gone in the time it takes me to add funds! The FOMO is truly infuriating at times.
So moving forward, after listening to the First Mint podcast with WadesETH, I’ve decided to take his advice and maintain 10% of my account value in floating Dapper balance. This will allow me to chase opportunities commiserate with my collection, while also giving me the ability to expand or contract my balance as the marketplace changes. For instance, in a bull market, I’d ideally be selling moments that I’ve been holding for a long time, so at that point my account value will go down. This will naturally lower my “10% requirement” of what I want to have saved, which will allow me to recycle my profits into the marketplace. Conversely, in a sell cycle, I can attempt to buy moments and snipe good deals from desperate sellers.
Know your strategy! And “Balance” Accordingly
I wrote about this at the end of my last post, but it certainly has been reinforced to me over the last three weeks: you need to know why you are buying moments in NBA Topshot.
For me, it’s not just about money — I Topshot because it’s fun, it’s engaging, and it makes me feel more connected to the game. In the last three weeks, I’ve bought NBA League Pass and gotten my girlfriend into watching basketball with me (these two things may or may not be correlated) because I feel more invested into the day-to-day happenings in the NBA. I know that Nikola Jokic is the new MVP frontrunner, I know that the Atlanta Hawks are playing good basketball since their coach got fired, I know that Nikola Vucevic is a great player that was trapped in the media desert that is Orlando, until he was traded to the equivalent of basketball Mecca (Chicago). I value Topshot for making me a better basketball consumer.
For others, it is about the money. And while that’s not my sole/ultimate end goal, I don’t begrudge them one bit, nor do I vilify them for pulling back or driving up prices as they see fit. If the entire NBA Topshot marketplace was made up of people like me who were long-term, nothing would really get sold unless you paid an outrageous price. Similarly, if it was all short-term flippers, the market would completely crash as they undercut each other in price. Every healthy marketplace needs this balance — just know who you are, why you are here, and don’t deviate from your course until you get new data or new evidence. Keep some portion allocated in high-risk moments, some in moments you may sell, but only for the right price; and some moments that you never want to sell. Treat it like your 401K allocation! Modify as per your goals.
Thanks for reading!
Coming tomorrow: Part 2 of the March reflection — NBA-context driven learnings