Investors Making New Connections in Valuations

In the last couple of years, investors in the NFT (non-fungible token) space have raised an important factor above all else: “the community.” It seems as if an NFT’s brand and its community are becoming one. The community, after all, defines the brand’s value.

All that being said, it will become increasingly important for investors and holders to establish a rubric for accessing NFT communities if the term “community” continues to drive investors to invest. Many metrics could make up this rubric. However, you can everyone bundle into one almighty factor: virality.

In the world of NFTs, virality drives value. Virality inflated numerous NFT valuations in the past two years. These projects get a boost from the likes of Twitter, which spreads them like, well, a virus.

NFT Virality

The connection between brand and narratives exists everywhere. From Lebron James’ Nikes to Federer’s Rolex, brands, especially luxury ones, dump copious amounts of dough into these images. What starts as a marketing campaign in the board room manifests as a narrative to the consumer. Contrasted with a smaller shoe or watch brand with less money for “big name” marketing, the consumer concludes, consciously or otherwise, that Nike and Rolex are the brands of winners. In effect, these brands went viral.

NFT purchasers can be profiled just as viruses can. The actual and prospective buyers of an NFT collection decide its ultimate value. Some collections appeal to tight coteries of buyers with niche interests. If so, the potential trajectory of that collection in terms of value will be limited.

Other collections gain value through scarcity, celebrity endorsements, or sometimes organic events. Wider appeal and a more-monied clientele project broader, richer markets. For creators and artists, narratives within their work bridge the gap between esoteric and attractive to a celebrity with a huge social media following is the golden ticket.

A prime example of this is the Cryptopunks collection. As of September 2021, the cheapest NFT in this collection was $400,000 whereas just a year before the price was a meager $1,000 to $2,000. The only difference? Crypto insiders, celebrities, and Mark Cuban had become club members. Cuban even went as far as calling Punks “the rookie card of NFTs.”

It’s safe to say the fervor for Cryptopunks has died a little as of late. All of the top Ethereum NFT collections have taken enormous hits over the last two months as part of the broader crypto market crash. However, as of this week, the cheapest-available Punks NFT tops out at $100,000, which it hasn’t done in months. The rise comes after two substantial sales in the collection totaling $5.9 million.

The similarities between sneakers and NFTs only go so far. Cryptocurrency can still be volatile as it goes through growing pains while sneaker sales remain consistent. One thing is for sure though, investors are attuned to how other sectors create narratives to drive their brands to create community and virality.

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