Stars have started buying into @BoredApeYC en masse. It started with Snoop Dogg (secretly), then Jimmy Fallon (publicly). By now Eminem, Paris Hilton, Neymar Jr, Bieber, etc.. have famously bought some BAYC.
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
Does it mean BAYC is a good store of value? https://t.co/COMe2BgDwL
👇
I mean, first of all, let's get a disclaimer out of the way: I don't know. Nobody knows. Anyone who claims they know is either delusional or trying to sell you something.
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
This will be one of my more speculative threads. I'm just guessing, y'all.
So here are my guesses.
As a grounding framework, I'll start by ruthlessly stealing some ideas from the recent @uponlyTV podcast with @Cobie, @ledgerstatus and the eloquent and unstoppable @saylor (who must win a medal for most entertainingly high answer to questions ratio!)... pic.twitter.com/Km2gSsO6V5
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
The key point I'll take is the idea that many tokens are currently securities, i.e. equivalents of company shares and bonds. @saylor makes the point that BTC is a form of (global, digital) property, like gold or land, not a security, and that makes it more resilient.
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
That seems to me like a fair point. Securities are tied to the life and death of organisations. Some organisations have lasted a long time, but most don't. As much as I may like and use Ether, its survival *is* tied to the success of Ethereum-the-cyborganisation. pic.twitter.com/Z2qgeoXa8c
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
If the Ethereum world computer stops being used in favour of something else, Ether will go to 0. The fact that Bitcoin doesn't actually *do* anything is a feature rather than a bug, because it means it can't fall out of favour once it stops doing that thing. pic.twitter.com/JTDGQ9GQV6
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
So back to our BAYC. Is BAYC a store of value? If we take "store of value" to imply long-term, as in, for 10-100+y, I think that hinges on whether you look at it as a security or as a digital property.
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
Each path will lead to different think-trees and resulting answers. pic.twitter.com/xxtewC1Sgl
Let's take the security path first. If stars are buying into the BAYC project and ecosystem and functionality that I've described in detail here - https://t.co/0RgWfuWGbu - then ppl buy BAYC for the utility rather than as property.
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
If so, I would assert that whilst things that are useful are more, well, useful, than things that are not, that presents a very critical long-term weakness that makes BAYC a very poor long term store of value. pic.twitter.com/6QvrZeX9Fa
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
The reason is competition. 90% of the NFT space is literally wannabe BAYC competitors. That none have succeeded yet doesn't mean that none ever will. After all, BAYC itself was a competitor to @larvalabs ' Crypto Punks, and the flip *did* happen, eventually. pic.twitter.com/ibai5vnX1r
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
We'll take care of the "historical" angle that is also at play with Crypto Punks a bit later, but basically, apart from a recent pump that has applied to the rest of the market too ( https://t.co/dKS8SEyHdc ), CP has trended slowly down from its highs as BAYC has taken over.
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
It's not unreasonable to think that there will one day be an Excitable Donkey Bowling Club which will dethrone the BAYC king in terms of utility. In fact, thinking that that's it, we've already developed THE BEST PFP PROJECT EVER, 4 years into NFTs, would be the deluded position. pic.twitter.com/YnvdZljgqq
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
So if the value of BAYC is based on its utility, if it is most comparable to a security that provides financial and non-financial benefits, and depends on an organisation remaining competitive... then its prospects as a long-term store of value are pretty damn limited. pic.twitter.com/FFYzyKb34h
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
Did Eminem, Justin Bieber, Paris Hilton and Jimmy Fallon buy their BAYC for the utility?
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
Well, you'd have to ask them to find out - if they even are willing to think about it and give you a thoughtful answer. In my experience, most ppl don't know why they do things. pic.twitter.com/vFNkfCmw04
Luckily, none of those people are in my phone's contacts list, so they will be spared my merciless questioning of their motives. We'll rely on wild guesses instead.
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
Good news Eminem, you're off the hook! 😅 pic.twitter.com/dzf7X2yBh3
Before even going into that though, let's look at the "digital property" angle, because that may form part of our imaginary answer from those famous BAYC buyers...
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
Is a BAYC a form of digital property?
Well, yes, of course. pic.twitter.com/VUUYcvx9i6
This is another angle where I think that NFTs can be superior to fungible tokens. If Eth/Ada/Sol are securities, that is all they are. They have no other value. Nobody buys Eth because they like the looks of it or just want to say they own it or show it off in a picture frame. pic.twitter.com/edaokMKKzm
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
You might say, nobody buys a BTC for those reasons either, so perhaps BTC is more a security than it might seem... And I think it's fair to scrutinise @saylor's claims before acting on them. But with a NFTs, it is very clear that there is some form of property involved. pic.twitter.com/m31lJYcwap
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
When explaining NFTs to ppl who don't know about them, I often resort to the word "deed", to explain what the NFT is - it's not the image it's pointing to, it's a deed that points to that image and unforgeably demonstrates that you own that thing. pic.twitter.com/qaxrCIY8Ic
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
So if NFTs are digital property rather than securities... are they a good, long-lasting digital property?
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
Well, it depends, of course. In this case, it depends on what drives the value of that property. pic.twitter.com/QNtzz7mlu7
What drives the value of land? The concentration of human activity on it, supported by how time-consuming travel is.
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
What drives the value of gold and BTC? The global consensus that they are good stores of value, supported by the fact that everyone is bought into that belief. pic.twitter.com/sewFLie5Dt
Neither of those apply to BAYC. They are definitely not a form of digital real estate. And because there's only a few 10ks of BAYC it is impossible for it to become a common delusion that *everyone* is bought into like gold and BTC (maybe with fractionalisation? Awkward tho). pic.twitter.com/1OQ1Kwt2wa
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
BAYC and Cryptopunks' value are driven by their nature as cultural phenomena.
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
They are great examples of so-called Veblen goods ( https://t.co/nZHGGzFeDJ )- the more expensive they become, the more desirable they are.
Yeah, that surely fits BAYC.
So BAYC is a luxury item that is more desirable the more expensive it gets.
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
It's a bit like a fancy piece of jewellery - you want everyone to know that you are so wealthy that you can afford to spend 500 eth on a pair of earrings or a BAYC. pic.twitter.com/hWZtbzwcdT
I'm not breaking any new ground here by declaring that stars are buying BAYC as a flex, a way to show off their wealth.
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
But let's loop back to the original question - are they a good store of value, if that's why they're being bought? pic.twitter.com/WV0eFozSgG
Well, if BAYC are a Veblen digital property that stars are buying to flex... I think we're going to find they make an exceedingly *poor* store of value in the longer term.
— Daniel Tenner (swombat.eth) (@swombat) January 31, 2022
Why?
Two reasons. pic.twitter.com/VIeEZNoVfd
Btw, if you've read this far, you probably are enjoying this. If so, you may enjoy many of my other threads - chronologically at https://t.co/X91GS2YlJN, or neatly categorised at https://t.co/wtpQTmVjEe .
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
If you want to thank me for writing this, please RT parts of it! ❤️ pic.twitter.com/OqX3PmgRGX
The first reason is to do with the kind of ppl who buy Veblen goods, i.e. the conspicuous consumption crowd. Here's the thing... buying one pair of ridiculously expensive earrings is not enough.
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
You can't just buy one $$$ painting and be done with your conspicuous consumption. pic.twitter.com/PcdTjx5Pys
To really flex, you have to show you can keep buying them again, and again, and keep throwing money away on ridiculous things as the trends shift. Wear that $100k dress a second time? Of course not, who does that? Poor people, that's who. pic.twitter.com/Zpb6yOV0LB
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
So my first assertion is that the "rich people buying BAYC to flex" trend is going to be fickle because of the nature of luxury goods buying. BAYC can't keep coming up with more new stuff for them to buy to flex. So they'll move on to something else. pic.twitter.com/039trKu7EN
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
The second reason is about what's driving the luxury angle of BAYC in the first place: as we said earlier, BAYC is a cultural phenomenon.
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
What's a common feature of cultural phenomena?
They come... and go.
Culture changes. Fashions shift quickly - as quickly as the NFT market! pic.twitter.com/Hj8OApwSDr
Buying a BAYC might be in fashion right now. It won't be in a year - it'll be so passé! Can you believe so-and-so bought a BAYC? What a bore! EDBC is where it's at now.
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
I think everyone in the NFT space is aware of how frighteningly quickly hype can shift. pic.twitter.com/vIH7S0Kg3M
And, as anyone in NFT-land goes, once the hype moves on, the price goes down, sometimes dramatically so. To make things worse, the Veblen mechanic goes in reverse - as the item goes down in price it becomes less desirable, so its price collapses further. pic.twitter.com/sKZvXlmNtv
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
We still haven't answered whether BAYC are being bought up as securities or as Veblen property... but it turns out maybe we don't need to, in order to answer whether BAYC is a good long-term store of value, at least in relation to stars buying it. pic.twitter.com/LNSOQcPaeo
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
Whether they are buying it for the utility (which I very much doubt they are), or for the luxury flex, neither of those paths makes BAYC long term, reliable stores of value.
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
So pls stop saying "wow, <star> bought an Ape and the price is going up, prices will never go down now!" pic.twitter.com/xo5QAThGlD
There remains one angle that might give lasting value to BAYC and, perhaps even more so, Crypto Punks.
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
After all, there is a type of property, a Veblen Good that has maintained and even grown its value over several centuries: the Fine Arts market. pic.twitter.com/D67rHeRc0W
Does that apply to Crypto Punks and BAYC? Well, there are many people who decry that those projects' output is not "art".
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
Those people are either ignorant/stupid, or just not spending the 5m required to see how wrong they are. pic.twitter.com/ZAnZGeHvED
No one in their right mind would declare that Andy Warhol is not a legitimate artist. And yet his soup cans bear more than a passing resemblance to a limited series NFT project... https://t.co/IVuIq35TJo pic.twitter.com/w5l0thZEiq
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
What makes those screen-printed soup cans still valuable today?
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
It's a combination of their historical value, their lasting cultural impact, and, most importantly, the fact that the key influencers in the art world say they have value.
That last bit can't be overstated. pic.twitter.com/iSysOjzXoF
The art world has this weird feature where things are worth something because all the people who control the supply declare that those things are worth that much.
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
Those influencers, traditional or crypto, are the key. pic.twitter.com/pgwnZNklf2
A Van Gogh might look great to you, but enjoying its stunning use of colour is not worth $82.5m. But there's only 900 Van Gogh painting in the world, and much like BAYC, no one will make more authentic Van Gogh paintings ever, even if they can be right-click-saved-as ad nauseam. pic.twitter.com/spHg110dz3
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
The limited (deflationary, even, since things get lost/damaged) supply, combined with being in great favour with tastemakers around the world, has helped propel art (deserving or not, depending on your point of view on the specific art) to incredible financial heights. pic.twitter.com/fxsKWm9IdB
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
No one who owns even the least interesting Van Gogh will sell it for less than a few hundred Eth ( https://t.co/VsQWfnHHqt ) - and that's for some of his less desirable creations. So therefore, the floor is set.
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
Could something similar happen with BAYC?
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
Maybe.
Ironically, I think that despite them being on the wane at the moment, it is more likely to happen with CryptoPunks than with BAYC. But it could happen with both of course.
And it might not, because... well... pic.twitter.com/Gte15yPXuW
As an important point: I don't buy the "historical value" narrative. Historical relevance does give something value, but not *that* much value. Yes, some historical items do end up having fantastical prices, usually when they are large or artistic, but more mundane items do not. pic.twitter.com/pWYh64hz2Z
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
You can buy authentic fungible tokens from thousands of years ago for a few of hundred bucks. BAYC will probably always be worth more than, say, Bulls On The Block, long after both projects are utility-free, but by how much? https://t.co/UQEe5bcMLX pic.twitter.com/x0RDj0v5Fh
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
The answer to that question is, imho, is squarely in the hands of tastemakers like @punk6529. In order to be able to do this they need to do two things:
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
- be reputable enough to remain tastemakers
- have deep enough pockets to buy out undercutters pic.twitter.com/XHuemZ82Z4
If you own a colourful Van Gogh worth $50m and someone tries to sell a similar Van Gogh for $20m, it's worth bidding that up or buying it off the books if only to preserve the value of your own $50m Van Gogh. If you're a billionaire, you'll do that. pic.twitter.com/FDTbRVCurx
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
This dynamic might work with BAYC and Cryptopunks too... but... they have a big problem there: numbers.
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
Van Gogh was a prolific painter. For a while, he painted a painting every single day. He still only produced 900.
Gauguin: 516. Cezanne: 1300. Picasso: 1885. pic.twitter.com/BqCz5VduFi
Can crypto tastemakers keep buying up the supply of BAYC and Crypto Punks at 50-100 Eth apiece to hold the floor? And will they care to?
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
The long slow drawdown on CryptoPunks' value suggests the answer is no. Not even for CryptoPunks. pic.twitter.com/viBUvxbgRt
My guess is there is a floor of historical/tastemaker value for these projects. And maybe some day it will go up to Van Gogh levels because of tastemakers willing it so...
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
But before it goes there, I think it will go down by quite a lot, eventually. pic.twitter.com/zwdWLz2X3L
So finally...
— Daniel Tenner (swombat.eth) (@swombat) February 1, 2022
No, I do not believe that BAYC/CryptoPunks are a good long term store of value, though they might serve that purpose in the short term.
As utility, they will be outcompeted.
As a flex, they will be forgotten.
As historical artefacts, they are overvalued.
gm & gl pic.twitter.com/INGsPtE1pr