# Analyzing NFTs Through Market Capitalization: A Fresh Outlook
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Chapter 1: Understanding Market Capitalization
Market capitalization is a fundamental metric in finance that offers a snapshot of an entity's overall value, be it a public company, a cryptocurrency, or even an NFT project. Investors and analysts frequently rely on this figure to assess a company's size, relevance, and growth potential. However, while market cap can yield useful insights, it isn't always the most precise or thorough measure for valuation. Therefore, the discussion below is intended to serve as a framework for analyzing the projects mentioned rather than as a basis for projecting growth. A thoughtful approach to market cap and fully diluted market cap can help prevent common investment pitfalls.
For instance, consider Squid Coin, a notorious example of a "shitcoin" that received excessive hype and attracted many uninformed investors. It ultimately failed spectacularly. If you encounter a coin that has been active for just a short time yet boasts a fully diluted market cap greater than Bitcoin's, it's crucial to reflect on your expectations. The conclusion should be clear: it's likely heading towards zero.
We're set to delve into how market cap can be utilized to evaluate leading NFT projects and see how they stack up against cryptocurrencies, sports cards, and the broader art market. This should be an engaging and possibly enlightening exploration.
Section 1.1: The Crypto Landscape
Cryptocurrencies are often ranked by market cap, particularly at the top. Anyone familiar with the space can easily name Bitcoin and Ethereum, the two leading projects that have solidified their dominance by consistently achieving market caps that overshadow competing projects. Currently, Bitcoin's market cap exceeds 550 billion, while Ethereum stands at 227 billion. During the peak of the last bull market, Bitcoin reached 1.28 trillion, and Ethereum hit 571 billion. Following these giants, XRP ranks third at 41 billion, despite facing challenges such as the SEC lawsuit.
Interestingly, you need to look down to the 46th position to find a cryptocurrency with a market cap below 1 billion—currently held by Synthetix, which facilitates synthetic asset issuance on the Ethereum blockchain. If you're not well-versed in crypto, reviewing the top 100 cryptocurrencies can be a surprising exercise, revealing how many you may not recognize.
This comparison allows for a more nuanced understanding across asset classes. While we primarily focus on NFTs, it's beneficial to analyze this across various sectors. It’s akin to the memorable scene in The Office, where the cast compares Schrute bucks to Stanley nickels, concluding that the ratio is "approximately equal to the ratio of unicorns to leprechauns."
Section 1.2: Entering the NFT Realm
When it comes to NFTs, Cryptopunks is arguably the most recognized and valued project in this sector. If you're unfamiliar, Cryptopunks is credited as the first "profile picture" NFT, creating a template that has led to numerous imitations. Currently, Cryptopunks has a market cap of approximately 943 million USD (or about 9.43 trillion Schrute Bucks), positioning it around the same level as the 46th largest cryptocurrency.
This relative valuation prompts a fascinating question: "Would I prefer to own the 46th largest cryptocurrency or every single Cryptopunk?" The answer seems straightforward; who would select a lesser contender in a saturated market over a leading entity in a misunderstood and undervalued domain?
Chapter 2: NFTs vs. Traditional Collectibles
Section 2.1: Sports Cards Comparison
Critics often dismiss NFTs for various reasons, some more valid than others. One common argument is that "anyone can just create one!" While this is technically accurate, it applies to virtually every collectible and creative endeavor.
Consider the absurdity of ridiculing someone who spends $100,000 on a Michael Jordan rookie card simply because "anyone could print it." This logic fails to account for the intrinsic value and historical significance of the card. Currently, there are over 6,000 unique Michael Jordan card types, with the 1986 Fleer #57 Rookie Card being particularly noteworthy. With over 24,650 submissions to PSA and an average value of around $8,100, the market cap of this single card type reaches approximately 200 million, making it comparable to the third-largest NFT project behind Cryptopunks and Bored Ape Yacht Club.
Section 2.2: Art Market Insights
Comparing NFTs to the traditional art market reveals intriguing contrasts. Jackson Pollock, a renowned artist, created between 400 and 700 works during his lifetime. Estimating the market cap of all Pollock paintings ranges from 1.25 to 2 billion dollars.
In contrast, Beeple, a leading NFT artist, gained fame for selling 5,000 daily works for 69.3 million dollars. However, the overall value of Beeple's NFTs is estimated to be around 100 million USD. The physical art market is projected to surpass 600 billion by 2027, while NFTs are expected to reach around 200 million by 2030.
Participating in this evolving space can be exciting. Enjoy the journey, trust the process, and remember that the perceived threats are often less daunting than they seem. Happy hunting!