The Sainted Seven

Thoughts on Acceptance, Rotation and the Marginal Buyer

Today we are going to look at the Sainted Seven which is my name for the NFT collections that have reached beyond the space and have drawn interest from the outside art world.

Let's start by naming names. Here's the roster of the Sainted Seven

  • Cryptopunks

  • Autoglyphs

  • XCOPY (early editions & 1/1s)

  • Squiggles

  • Ringers

  • Fidenza

  • Terraforms

The current situation is this: ETH mainnet NFTs came to prominence when there was limited competition for financialized culture and entertainment. Because they were the only game in town, everyone played them. Now, we have more chains and we have a broader range of categories (gamblefi, socialfi, memecoins, AI art, etc...) and that increased breadth has lead to a slow and continuous bleeding across a broad swath of golden age NFTs.

What we've learned over the last year is that the "people in it for the art" are a much smaller group than was previously assumed. Now that there are more categories, collector guys are finding their new true selves as gamblers, memecoiners or just plain opportunistic guys.

Because new chains and categories are outpacing new crypto users, there's a big problem. Who is going to buy all of these NFTs? For awhile, people still in it for the art rounded out their collections at lower price points, but the sell pressure kept coming and that group of buyers ended up exhausted. So NFTs on ETH flatlined...except at the upper end of the market. We've seen some massive sales this year and they've all been within a subsection of the Sainted Seven. So what's going on here?

The answer is the marginal buyer is in control of the market, and the window of what they want to buy is extremely small.

Who is the marginal buyer? That's hard to say because in Q1 there was $46 million spent on 12 pieces from Larva Labs (two aliens and a full glyph set) and no one has identified themselves as buyer(s). It used to be that the people making trophy purchases flexed their new status in our social layers, now they prefer to hide behind anon wallets or pseudos. That change in behavior is telling in and of itself. We are rotating from everyday players in the crypto space to basically walled off LLCs who treat these elite NFTs the same as buying a luxury condo in Manhattan. The appreciation they seek is strictly financial.

My guess is the marginal buyer is crypto adjacent, meaning they made their money elsewhere (fintech, trad finance) and then moved into crypto (BTC & ETH) as a way to get further out on the risk curve, did well there, and decided to step a little further out. Either they already own contemporary art or possibly skipped that entirely and view elite NFTs as a way to own tomorrow's Harings and Basquiats. These people are crypto fluent, but not necessarily cryptonative (although some certainly are, this market action isn't one size fits all).

So let's walk through the Sainted Seven and I'll share my thoughts on what is happening within each of them during the first 4 months of 2024:

Cryptopunks

Punks are eternal, the root stock of this entire scene and sitting in a weird zone that makes them both commonplace and out of reach because there's 10k of them and the cheapest one is currently 42 ETH ($147k).

The entry price on punks in USD terms has been very stable throughout the last 18 months. As ETH goes up, the floor price of punks goes down. Interpret this simply as there's not enough ETH denominated wealth to move the punk market up, and your marginal buyer is pricing in USD. As an added wrinkle, this USD buyer prefers punks based on aesthetics and not rarity. Said another way, they want a punk that either looks like them or looks good on a wall. This is no market for beanies.

Zombies, Apes and Aliens exist in a separate class of punks. There's being cryptonative wealthy and buying a hoodie, and then there's balling out and buying one of these three types. The thing is there's not been a lot of sales in the top end. An ape hasn't sold in a year, five Zombies have sold in the last year, but two aliens have sold in the last two months. Compare that to Hoodies where 24 have sold in the last eight months. What that tells me is there's a limit to what cryptonative wealth will spend on a punk right now, and to find someone willing to spend up past that you need the marginal buyer.

Seems like the marginal buyer is a teeny tiny group of people and they are only willing to spend up on the rarest of the rare.

Now there's a bit more going on here, and that's at the Ape level where I know there are a lot of prospective sellers, but they are not interested in selling for a big discount. You have a class of folks who would like liquidity, but also have the wherewithal to go long until this pool of marginal buyers expands.

Autoglyphs

Autoglyph #221

Autoglyphs got a massive endorsement when a full set sold last month for 5000 ETH. A month before that FlamingoDAO (disclosure, I am a member) decided to take the plunge and complete our set. Which is a great outlook for Glyphs, except one sold for 145 ETH yesterday which is about 50 ETH cheaper than it should have.

What this points to is timing. The pool of marginal buyers remains small and wants the top of the market. There's six full sets (possibly seven, I should really know this). A serious collector wanted one of them, and paid full freight to get it.

Move past that one buyer and there's a disconnect between early owners who want liquidity and inflows into the top of the market. Over time I expect this to correct, but for now it shows just how few people and entities are willing to operate in rare air.

Squiggles, Ringers and Fidenzas

Ringers #50

Art Blocks has had a tough go of things since really Anticyclones and Quilin. In a way you can think of AB as having the same problem Crocs did when they expanded, which was overproduction as a result of misreading initial demand. Turns out dependence free immutable generative art is very similar to indestructible rubber sneakers. Once you have a few, you don't need a ton more, and there's a finite number of folks who will be caught dead in either.

The high end of the Squiggle market had a good run of accumulation in 2022 and 2023. My read is that the high end cryptonative market and the marginal buyer both packed their bags on this set already and don't have a need to collect more. Meanwhile, the large set size and broad distribution across the more retail class of NFT collector has resulted in a drag on floors as rotation out of the generative art category intensified.

Ringers has been a slack market over the last year, which I think was a result of cryptonative(ish) higher end collectors taking large positions in the set early, and then deciding they maybe weren't as in it for the art as they thought they were. Or they took big positions expecting greater demand for it in the future and that demand failed to materialize. In a way, Fidenza may have stolen its thunder and proved a more accessible and enduring collection. Either way, I view this one as imbalance. Too much early concentrated accumulation, a lot of those folks looking to walk around the same time, and the marginal buyer deciding they want to deploy in other sets. This is a quirk of small population sizes. Ringers got hit with demographic stochasticity. A couple factors lining up in the same direction can have an outsized impact.

Fidenza chugs along fine. People like the flow fields. A good amount of supply hit market last year (especially with 3AC), but it was absorbed in a way that shows the demand is there in a way it isn't for Ringers at the moment. Just because the crypto scene embraced a collection, doesn't mean people coming into the space view it the same way. Or in the case of Fidenza, they did. We can only know these things with time.

Terraforms

Trad art and your marginal buyer with an art advisor likes the Terraforms and what Mathcastles are up to the same way they like what Kim Asendorf is up to. That being said, the construction of the set and the lack of explicit, visually pleasing, easy to grasp outputs means Terraforms are not going to command the sort of trophy buy prices we see in other sets listed in this article. So we get this situation where the respect and appreciation for Terraforms is there and nearly universal, it just doesn't translate into price. Your marginal buyer has a few of these in their wallet, but they are early on this same way we all are.

XCOPY

XCOPY 04 - Pixelchain

XCOPY is an outlier on many different levels. They work across formats (1/1s, editions, wearables, pfps, coins, consumer goods) and carry enormous variation in set and unit sizes. X is the only person in NFTs who will see their work sell for $2.98 and $10mm this year, and that versatility is part of the appeal. When you see someone producing across categories year after year, it's the mark of true talent that separates someone from their peers. That scope also allows for a large amount of narratives to form and liquidity within their output to be viewed at both a macro level and tranched into slices.

XCOPY sales have been flying this year and there are a multitude of reasons for that. The action has been around 2019-20 era early work with low set sizes, so it only takes a few hungry buyers to spark market action and those folks are here now. Beyond that, the formation of Doomed DAO can be viewed as a supply sink and probably lit a fire under individual collectors to pack their bags. Finally there's a something for everyone, from a whale looking for a 1/1 trophy to hang, to a deep cryptonative collector wanting to own a seminal piece of history via an edition.

Artists have moments. As hot as Snowfro and Squiggles were at one point, XCOPY is now having yet another moment in the sun. This doesn't need to be more complicated than that.

Conclusion

We are seeing daylight at the very top end of the NFT market. The signals are strong, but very narrow and this is a result of wanting trad or marginal buyers to come buy our bags.

Be careful what you wish for is the age old saying, and we wished for outsiders to buy our shit. We got them here now, but only a handful of people showed up. Those who did have their own process, criteria and values which may or may not be the same as ours.

My read of the market is that these marginal buyers view this small group of the Sainted Seven as what has crossed over, and are not willing to pay up for collections beyond that.

The glass half full take is that awareness and appreciation for more works will continue to grow over time. More buyers will enter the space, more collections will be elevated, and we'll see the collector base broaden to include new cryptonative collectors to take the place of the exhausted early ones.

The glass half empty take is we got high on our own supply, created a hell of our own making, and the buy action we are seeing now is the first true outside evaluation of NFTs. When a collective hallucination ends, it's up to an outsider in the cold light of day to take an objective view of a scene and decide what its worth.

The world isn't black and white. Both views of the glass are partially true, and only time will tell just how full or empty we are. However, what we can say about this moment in time is that the high end of an entire movement is being valued and repriced by a very small set of people. On the cryptonative side, collectors are exhausted and catching their breath. In their absence a tiny group of trad, but crypto fluent folks, are staking claims to the most influential pieces in the space.

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