The Game Theory on Grails II
I’d like to start off today’s newsletter by saying that this is one of those editions with a ton of conjecture - specifically, the worthless kind. Everything in here is just my opinion from what I have seen based on my ten years of experience in the space. I am wrong all the time, so I certainly could be wrong here. Also, I am currently in the market (always am) for possibly purchasing a PROOF pass, or another Moonbird, etc. - so I wanted to put that out there just so people don’t think I have any ulterior motives here.
Ultimately, today’s newsletter takes a largely financial look at the upcoming Grails II drop - which is pretty much the antithesis of the entire project (looking at it from a money perspective), as you can see @eli_schein opine to below.
But since this type of speculation is going to happen whether we like it or not (it already is), I figured we should talk about it. The goal here is to try to curb some of that unnecessary speculation by giving you just a raw look at the data.
In case you missed it, @zeneca_33 put a great newsletter article out a week ago, aptly titled “Impossible Expectations.” While he did speak to the @oddities_xyz reveal and @moonbirds nesting rewards in that context, the overall larger message really applies to the crypto space as a whole - teams are often burdened by the unachievable expectations put on them by communities. Sometimes this may be deserved if something was promised, but often misinterpretations, poor communication, or simply projecting our own desires is the issue. If you haven’t read it, check it out below, it’s a great primer for what we are about to dive into.
Grails II
As everyone knows by now, soon PROOF’s Grails II will hit the scene. If you’re not sure exactly what the project is about, I highly recommend you read this quick thread - it does a great job breaking down everything behind it.
As @mikewunyc mentioned, before @moonbirds, Grails was PROOF’s flagship drop. After the launch of Moonbirds and Oddities, however, the team’s attention has re-focused on putting out this incredible project and rewarding patient collective members while also highlighting incredible artists in the space. While previously only Collective members were able to mint grails, for this upcoming version they opened it up to the 176 Moonbirds with Grail traits.
However - and this is my opinion - I don’t think this was ever planned. Instead, a lot of community members speculated that the grail-trait Moonbirds would possibly receive grail access based on previous team spaces/comments, and they ended up paying a premium for those specific birds. The team, being as considerate as they are, “did the right thing” so to speak and made sure to honor this and throw us all a bone - but I don’t believe the team had it in mind when designing the grail trait.
My belief that this is a one-off thing was only further solidified by the announcement in Discord that specifically mentioned that Moonbirds are not guaranteed access to future seasons.
Personally, this sounds like the team walking back expectations going forward for what access Grail Trait Moonbirds would have (and this is what we all wanted, right - to not just be left to openly speculate). I could imagine many collective members would not be happy about Moonbirds getting access to these collective-specific “drops” when their cost of entrance is much higher, so going forward, I would not expect Grail Trait Moonbirds to have access to future grails.
Value Add
I was actually looking into obtaining a PROOF Pass the other day (25th/26th of July) as the floor had fallen into the low 60s, but in some twist of cosmic fate, this was the day that the Grails news leaked out into different communities as soon as it was mentioned within the private PROOF Collective townhall. Remember, the Collective got this information before anyone else - that’s pretty much the point behind the collective to begin with.
As soon as that happened, a few deals I had fell through, and people started re-listing their passes for 80 eth (20 eth higher than recent sales based off the Grails leak alone)! Others took them off the market entirely in anticipation of getting their mint passes.
Grail Moonbirds also took off, getting a premium of about 12-15 eth over floor birds.
Now, this didn’t necessarily mean that people were paying these prices of course, but rather that holders expecting the mint pass valued their NFTs more. For example, check out Opensea’s recent sales activity.
Even though many lower listings were elevated towards 80 eth, someone still accepted an offer for 60 eth, and IIRC I believe a Prysm group purchased the one for 72 (don’t hold me to it). If you check x2y2 and Looksrare a couple others sold for 72 as well. There hasn’t been much movement otherwise with the current ask being at 77 for a few days. If you check the trading channel in the lounge, people are still asking for high 60s OTC as well and not getting filled.
Similarly, for Grail Trait Moonbirds, you had a few people ape quickly (three to be exact).
But the vast majority are sitting there still, likely overpriced (the market agrees considering they are not selling).
So, then, if we can generally see that the market does not agree with the large jump in price based purely on grails speculation, then what should the extra value be of these NFTs that will soon be given mint pass drops? Let’s check it out.
The Devil in the Details
First, I should state that if you want to pay a premium on a pass or moonbird because you really want to participate in the project and you want to hold the art - then having access is invaluable. It truly is a unique project, and it’s something really cool highlighting great work from well-known artists, as well as artists breaking into the space. It also is giving a platform and voice to many artists who otherwise may not have one, which truthfully is the most noble goal of all. Personally, I think this Grails II drop is going to blow the first one out of the water as well, with all kinds of unique twists and spins coming our way. Don’t be surprised if some of the most sought after grails go for even more than the Protoglyphs in Grails I.
But, if you’re like most people in the NFT space, you may be wondering if it’s a smart financial play to cough the money up just to get access to this project. In short, I don’t think so at current prices.
From a purely financial perspective, I think you are paying an extreme premium for a “reveal gamble” like any other NFT project. People are baking in the possibility that they will be the one to reveal the first Protoglyph to sell for 80 eth again.
If you look at the highest last sales (all time!) of Grails I, this is what it looks like:
Right off the bat, you can see that only 23 out of over 1000+ minted grails sold for over 20 eth all-time. So, if you buy a collective pass with a 20ish eth premium (80 eth) for a short term grail play, you have a 2.3% chance to recoup that money based off previous grails data (and that’s not accounting for fees and royalties, so even less than that). Also, grails supply this time is around is 1251, which would lower that to a 1.8% chance. Not to mention that you can see that a lot of the same work ended up going for cheaper in the future if you weren’t one of the first to sell!
If you look at overall grails sales (including most recent), I think it gives a much more accurate representation of the financial returns we could expect on average. Most sales are only for a couple eth.
If you look at the all-time average price, it’s 6.2 eth per grail. But that includes the outlier data like the first two people who sold their Protoglyphs for 75-80 eth before the prices halved to 45 and 35 eth, as well as many of the higher prices which are obviously not indicative of what most people returned.
Even if we wanted to play it safe and say, on average, a grail will return 6.2 eth of value to a minter - that’s certainly far less than the 15-20 eth premium passes are going for or the 12-15 eth premium grail trait birbs are going for.
Summing it Up
So, to bring it all back - what’s the play here? I think it’s pretty clear that if you are looking to collect the art and participate in the amazingly fun mechanics behind Grails II, you want to support emerging and underrepresented artists, etc., then you pay whatever premium there is because it’s invaluable. It’s going to be a blast and I’m going to try and pick up a mint pass on secondary if the value is there.
But, if you are looking at this from a purely financial perspective, I’d be very careful aping at the moment as my gut (and all this data) tells me it probably will not offer the returns many are expecting unless you get lucky and hit a rare (and remember, your chances according to past data are less than 2%). Personally, I’d be happy to pay (and have tried unsuccessfully) around a 5-7 eth premium for a chance to gamble on a Grail from a financial perspective. So I’ll be interested to see if mint pass prices are around there (although now I’m sure I’ll get frontrun just to prove a point😂).
While I’m sure this post may not be super popular amongst a lot of people (namely anyone holding an NFT with access to a mint pass), I told myself when starting this newsletter that I would give my honest opinions about things to you all, and that’s all this is - my opinion. While I may be wrong on this, the last thing I want is my friends to lose money getting caught up in fomo, and as some people felt slightly misled by what Oddities were, I think it’s important to take a logical look at the numbers and approach this a bit more conservatively. If nothing else, I hope you found the data interesting, and I appreciate you taking the time to read my thoughts, even if you disagree!
That’s it for today - I hope you have a great Sunday! No extras today because I literally ran out of space!