Thread by @paintwifblocks

1/ 🧵Observations on sources of pricing efficiencies for the art NFT market

From what I see there seems to be several categories of pricing inefficiencies - read on 👇

I. First category of pricing inefficiencies:

#NFTs #nftcollector #artblocks

a) Divergence in valuation vs. intrinsic worth. In equities markets, valuations of an asset/stock can differ substantially from the intrinsic value of a firm for a while.

Viewed in another way is the concept of Mr. Market, an allegory created by Benjamin Graham to describe...

...what he believed were the irrational traits of the stock market and the risks of following groupthink.

b) Second, NFT market inefficiencies are exacerbated 10x by a breed of participants not typically active in tradArt - very short-term traders.

In TradArt its generally

..not as frictionless to do intra-day trading of physical artwork as in NFT land.

With various types of long/mid/short term agents in the arena, many scenarios of mis-pricing will continue to present themselves in NFT art

-> thats not a bad thing for long term collectors imo

Price floors & ceilings are often dictated by a flipper or whale collector who's willing to pay a staggering price for a piece.

Sometimes, floors/ceilings can be irrational for ex when its driven by one desperate seller who wants immediate liquidity.

Same arg for ceilings

c) Third, art appraisal involves some degree of subjectivity, which adds to greater pricing variance than for fungible assets.

d) Fourth, attention spans/hype often focus on the latest shiniest NFT mints/drops leading to near-term frothiness as reflected by pricing momentum of some Artblocks collections

while earlier-dated quality collections may go overlooked.

II. The second category of mis-pricing can show up within many collections:

First, one way to describe Generative Design quoting Michael Hansmeyer - as an art form that aims to "[design] not the object — but a process to generate objects.”

Given the definition of gen art...

as a process, a range of outcomes & rarity for select pieces are typically created within a set (some exceptions ex. The Currency by Hirst).

The different distribution of traits in the gen art algo results in certain artistic traits showing up more/less frequently...

Often a portion of a 1000-item collection might be valued closer to the p floor, while a small number of items in theory should be valued much higher than the average p based on artistic merit.

For some sets, that disparity/range can be very wide.

However, in my view pricing inefficiencies on the secondary market often result in higher-grade pieces not valued fairly based on artistic qualities and weighed down by market trends at the moment.

...brings me to a final thought -

Considering above pts & how nascent the on-chain generative art genre still is

there is great need for more informed art critiques, analyses & discussion of the artistic qualities and technical processes behind generative art.

Happy to hear other opinions👂

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