If your name’s not down…
Knowing what to buy is a problem almost all art collectors face. To value works as assets for future sales, buyers need to be able to interpret artistic meaning, recognize an artist’s skill, and see how a piece of work fits into the wider cultural picture.
The problem is particularly complicated with generative crypto art. Like modern art, generative art is often conceptual and requires appreciation, as does the artist’s ability to turn their ideas into images through coding. Collectively the two skills are so mystical that most people prefer to say “my 5-year-old could have done that” rather than risk investing in a collection.
In the art world, this is where advisors come into play. It’s their job to understand who and what is hot now and will continue to be in the future. Advisors get to know their clients’ tastes and advise them on purchasing, and managing portfolios, for a fee. It saves time and effort while reducing risk.
In crypto, owning a membership pass NFT is roughly the equivalent of having an art advisor. Groups such as Proof, gmDAO, GrailersDAO, and UltraDAO select artists and collaborate with them to create unique works of art for their pass holders. There’s usually a limited number of passes available, making them scarce and valuable.
The deal works well for all: artists get a captive audience of buyers, and buyers get exclusive generative works produced in limited quantities. It’s expertly managed supply and demand.
The method of investing I want to discuss today is one where you don’t need to purchase any art (although you could if you wanted to try banking a quick profit).
To begin with, Proof’s Collective membership opened in December 2021 with passes going for between 1 and 5 ETH in a Dutch auction. Based on market prices at the time, the maximum entry price was around $20,000. Since then, the price for a Collective membership NFT has been in a slow, steady, almost up-only mode.
Even in the bear market, proof Collective’s average price has held up (Source: NFTGO)
Currently, the floor price for a Proof Collective pass is just over 77 ETH, the equivalent of about $127,000. If you bought the top of the Dutch auction and held a pass until now, you’d be $100,000 in the green. According to Dune data compiled by @ruth, of the 1000 Proof Collective passes, 920 have been re-sold. That shows that flipping these passes is a popular trade.
You might expect that the floor price would suffer with over 90% of the collection hitting the market since the initial sale. But the success of Proof’s Moonbirds project, a collection of 10,000 pixel art owl avatars, two of which were available for free to each Collective pass holder, explains why the floor hasn’t suffered. The current 19 ETH entry price to the Moonbirds community has shown investors that membership passes can be productive assets— the money tied up in them can make more money.
As a result, passes continue to sell at a premium, maintaining a rising floor price on the likelihood that Proof will continue to deliver value to holders. This has become the basis for the trade. At this point, it’s worth looking at passes with more affordable entry points.
gmDAO is working with many quality artists. You can check them out here. They’ve already been dropping artworks, and memberships currently trade for under 7 ETH. This may not seem especially cheap, and I generally agree given the risk, but look at this chart showing their membership pass sales price.
gmDAO membership passes floor price history (Source: NFTGO)
Notice how the price, represented by the purple circles, shoots up in the red boxes. This has happened twice when gm announced drops. There was a clear surge in demand, enabling holders to sell, and the floor price now seems set to hold higher following the most recent drop.
As with Proof, the market now looks like it expects gmDAO to continue producing value for holders. This can happen for any of the membership passes I’m sharing today. As the price has increased, the trade is now viewed as being less risky. The drop’s value has shown the productive potential for the membership passes, and investors have piled into the trade out of FOMO.
GrailersDAO is another membership group. Their membership pass is cheaper at just under 1.5 ETH because they are not currently arranging drops for members. They say collaborations are coming soon, but until it happens, a purchase is a higher risk because they haven’t proven they’ll produce good results.
Let’s explore the risk. The good news is that Grailers seems to have what it takes. They’re advertising blue chip NFTs their members collectively hold, demonstrating their understanding of crypto art and likely effectiveness as curators. It’s a move that borrows from Proof’s playbook. In addition, their treasury has several Tyler Hobbs pieces, and they have an impressive artist roster. Traders will likely pile in if they keep their promise to launch drops for members. If you’re happy with this risk, consider getting in now.
Finally, UltraDAO will soon launch its ULTRAPASS membership. As with gmDAO and GrailersDAO, this team real expertise on board, being founded by Chris Wallace, a Proof Collective member with one of the sweetest collections of generative art grails you’ll see. As with gm and Proof, Ultra memberships will be limited to 1,000 passes, restricting demand and likely raising prices to attract the best artists.
I hope you like the idea of purchasing NFT membership passes. They let you get exposure to the value of crypto’s art market without having to identify your Velitchkovas from your DesLauriers. Optionally, once part of the club, you’ve effectively got an options contract enabling you to buy great works at a fixed price to sell or hold. With the generative art scene growing every day, this could be one of the best ways to get your hands on a future classic.
Until next time