Why Scarcity Matters When It Comes to Collecting NFTs

Adam Kantrowitz
Adam Kantrowitz
Why Scarcity Matters When It Comes to Collecting NFTs
Table of Contents
Table of Contents

First off, I would like to note the difference between scarcity and rarity. Many NFT collectors look primarily at rarity when it comes to trading NFTs, and while rare traits are important, it is not the only thing that determines value. Scarcity refers to how much of a particular project is available at any given time. It is about the supply. And if that supply doesn't meet the demand, it can be the recipe for a rapid rise in price.

Scarcity in the NFT Marketplace: A Case Study

I decided to take a look at scarcity in the Entrepot marketplace to see if it really matters. Here is a short case study using just two of the many projects available right now on Internet Computer.

Poked Bots: This drop was among the most anticipated in the Internet Computer ecosystem, and it has proven to be among the most successful. That makes sense because of the incredible artwork featured in the collection. In fact, Dominic Williams himself commented on the artistic talent of John Ball (designer at Poked Studios) in this article on Medium way back in 2016.

However, anyone who bought a Poked bot for 4 ICP in the public sale will notice that the floor price is presently 3.7 ICP - down about 7%. It's not an issue with rarity. The rarest Poked bot sold for an Internet Computer record of 3,000 ICP! However, the bots are not exactly scarce. Right now, over one-quarter of the collection is available on the secondary market.

ICPBunny: On just about the opposite end of the spectrum, you have ICPBunny. While the project is exciting and earning carrots is fun, you don't see many people using bunnies as their profile pics. The 8-bit art is nostalgic but very basic. The all-time biggest sale for a single bunny is a mere 10 ICP. Almost every project on Internet Computer has a bigger single sale than that.

But if you compare the floor price (currently .80 ICP) to the public sale price (.35 ICP), you can see that collectors are up more than double what they paid for their bunnies. What's the deal? Less than 5% of the bunnies are available on the secondary market. That kind of scarcity drives up the floor price. There simply are not that many bunnies available, so people are willing to pay for them.

So Which Is Better, Scarcity or Rarity?  

It's not about which is better. For example, the Poked bots have twelve times the sales of ICPBunny in volume. In fact, that top bot sale of 3,000 ICP is nearly on par with the entire volume in sales for the bunnies. I'm sure that rarity means everything to the person who sold that bot. But scarcity is the key to long-term gains for the bunny holders who refuse to part with their NFTs (and that's over 95% of them).

When the bunnies made an announcement about a partnership with MarsPool, the number of bunnies on the market dropped by about 40% (from a little over 500 to a little over 300). That shows the power of scarcity. The less there is available of something, the faster it can disappear with just one big announcement. As you can see, that offers the power to benefit an entire project.


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