We may think that scarcity is always bullish for an NFT collection for those holding it but it depends on a range of other factors that will be unpacked below.

As will all articles on this account, this article is one of opinion. Hopefully well formed opinion but opinion nevertheless.

The following factors need to be considered if scarcity is a major factor in why an NFT or collection may be a good decision.

Photo by Shubham Dhage on Unsplash Scarcity Considerations

Comparison to other like collections

Thinking: This collection is just half the number of the previous collection that was very successful, so this one should be successful.

Reality: The factors, timing, sentiment and purchasers that made the previous collection successful may or may not be still present. Also, are the original purchasers of that collection the same buyers that are being relied upon to make this collection a success? One group of people only has a so much liquidity and that liquidity may be allocated already to the original collection.

Lesser comparative assets

These are NFTs that are comparable to a collection and may prove an alternative to some people. For example a different colour of the OG collection.

Will alternative lesser and comparable NFTs be released that will effectively extend the supply or dilute the available funds for the original collection? Comparative assets such as a new color variant, second release.

Reissues

This is a very niche situation, however, there is a case that can be made for re-releases of the same NFTs. I know of digital assets currently that reissue new stock of the identical items after each sell out and a set period. This allows markets to form, presumably sell and then it starts again. The only difference in the NFT is the designation 2nd release or similar.

Hyped micro releases

Some collections release small amounts of a collection with additional benefit and achieve initial hype. Recur did this with their Rugrats collection for example. They released 10 NFTs with additional benefit that had a greater utility than the rest of the collection. While these micro releases are hyped for a time they may be diluted by the impending releases.

Circulating supply

We often think about circulating supply in a coin or token sense but it also applies to NFTs. Some collections will stage the release of there collections over weeks or months and in some bearish cases years. The collections some times try to manage their communities but buyers need to understand each situation.

Additionally, To gauge the scarcity or drive to buy, often potential collectors will simply look at floor prices in their decision making, but they must also consider the recent sales amounts and volume. If a collection is large but there is a small number of listings this doesn’t necessarily mean a bullish exclusive situation. It may just mean that holders don’t see market conditions worth listing into.

Whale holdings

If 1 or a few holders own a large amount of an NFT collection and dont have them listed this could correlate to a seemingly risen floor when in reality these whales could effectively flood a market if they so wish. They are market makers and breakers at the end of the day.

Too small a collection

If a collection is in its entirety under say 50 items, there is a good chance that this collection won’t have enough marketing and hype to make it and sustain high floor prices, regardless of utility. Niche NFTs can do well but they must be coupled with a larger collection.

  Photo by Jan Canty on Unsplash The benefits

Exclusive Communities

Many NFT collections have strong communities that, to take part, you must be a holder. These communities can be made up of very rich or talented individuals who will enrich the lives of the holder through their affiliation.

Prestige

As in the physical world, there is a benefit to having a small batch anything. This translates well to the world of NFTs as long as the overall collection for this fandom isn’t too small. A 1:1 in a collection of 1 is worth less than a 1:1 in a broader collection of 100 of the same item.

High cost of entry

The potentially higher cost of entry into these more exclusive collections may lend themselves to a more exclusive club.

An important consideration

There is a diminishing return when it comes to collection size.

A collection size of ten does not afford community and could actually hurt the exclusivity of a collection.

I remember this when collecting physicals. You may want a one of one but for it to be truly collectible, there must be several the same or like items potentially available. Closely aligned 1:1s could overcome this in the wilderness problem if you were considering running a unique unrelated collection.

This article was originally published on medium.