Topshot Update: Weak Hands and Re-Investment Strategy

How I have handled the dip in the Topshot marketplace

Nothing lasts forever, especially parabolic increases in pretty much any market. With a huge boom on Topshot that took sales over $7 million in a 24-hour period just a couple of weeks ago, marketplace sales are now in a bit of a decline.

Of course, everything is still way up from where it was even a month ago, and that should be the main focal point when examining the state of Topshot. The market was a complete frenzy for a short period, but a 50% loss on something that was 12x what you paid for it is still 6x, a great return.

How have I handled this dip? I’ll get into that shortly.

First, Some Notes on the Site

Topshot had been taking a bit of a beating with slow load times, site crashes, and major issues during virtually any pack drop. This was admitted to be a scaling issue in the latest State of Topshot post, which was what I think a lot of plugged in people assumed was the case, and what I had suggested in last week’s update.

The good news is that many of these issues appear to be clearing up. The site has been running incredibly smooth for days now, with no major lag times for listing or de-listing moments. This is a tremendous change from last week, where we faced multiple multi-hour maintenance windows. Withdrawals also appear to be on the horizon, with a lot more transparency to users on wait times.

I was also a huge fan of the most recent “stress test” pack drop. This was expected to be a test for how special drops will take place going forward, with a queue and randomized virtual line. I ended up being unable to get a pack, but the process was fair and accessible for all users. There was one hangup that allowed some users to scoop multiple packs at their spot in line, but that was the only major issue I noticed.

It is clear that the people at Topshot and Dapper Labs are putting forth their best efforts to improve operations, and really get the most out of this product.

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My Weak Hands

With the dip, there has been some banter about “strong hands” versus “weak hands” in this space. In case you are unfamiliar with this terminology, here is an easy-to-understand description from Investopedia:

I am definitely a little more weak-handed by nature, but I was noticing throughout the week than my less notable players were declining faster than my stars — even if the moments were more scarce or from more valuable sets. For example, take a look at how prices have fluctuated for a Norman Powell Series 1 Metallic Gold versus a LeBron James S2 common:

This free tool has helped me to make a bunch of market decisions, and is definitely something I recommend using. I like using Powell in this example because there have been a high volume of sales this week given his inclusion in the latest MGLE challenge. You may recall that last week, I managed to sell a Jarrell Brantley MGLE as part of this challenge for $1,299. Clearly no such luck was to be had this week!

LeBron, meanwhile, has kept a relatively steady price throughout this dip, even though it has come down a bit. This is an example on the extremes, but it underscores my point: people don’t want to pay for moments from mediocre/bad players, even if the scarcity is good.

Realizing this, I decided that I wanted to sell off a bunch of my moments, and look to re-invest in the stars: LeBron James, Steph Curry, Kevin Durant, etc. I also wanted to focus more on low serials and notable moments. In the long run, I believe that these are the moments that will hold the most value.

It also doesn’t really hurt me to sell “low” on most of my moments, because they have still multiplied greatly from when I first started buying. Getting more liquid to be able to pick off some falling star moments seemed smart. My objective is to acquire more Google-type of investments.

Every asset has its low points, but time and time again we’ve seen the major companies — Google, Apple, Amazon, and more — continue to go up over longer timelines. I rode the penny stocks to some great value, but now it felt like time to lock into some moments worth hodling.

The Investments

I’ve sold off just about all of my “excess” moments, looking to keep only the following from my initial stash:

  • Kevin Durant S2 LE Common

  • Dwight Howard S1 Western Conference Finals

  • Jayson Tatum S2 CC Common (#620)

  • Jaylen Brown S1 LE Common

  • Caris LeVert S2 LE Common (#39)

The thesis was simple: collect star-type players, preferably with scarce or low-serial moments. The Durant moment is of his first bucket with the Nets, and post-Achilles. Howard’s WCF block is his first moment on Topshot, and he is a sure-fire Hall-of-Fame player. Tatum is at low serial and one of the rising stars in the league. Brown I consider to be a similar player to Tatum, and the S1 commons have held a lot of value.

LeVert is a little bit of a detour from the rest in terms of player ability (I’m not positive if he’s quite in the Brown tier), but it is a low serial moment, and one that I think will increase rapidly increase in value once he returns to the court. With these moments as my base, I have made the following purchases to create an excellent nucleus of moments:

  • Paul George #726 S1 Common - $99 (and-one over the backboard)

  • LeBron James #337 S2 Common - $550 (three where he looks at the bench)

  • Kevin Durant #730 S2 Common - $340 (same as my other KD, but lower serial)

  • Steph Curry #49 S2 Common - $550 (very low serial LE moment)

  • Luka Doncic #1797 S1 Common - $575 (playoff game-winner)

  • James Harden #2197 S1 Common - $139 (Game 7 block to seal the win)

All of these moments involve some of the game’s best, came at what I perceived to be decent values, and involve memorable/interesting plays. The lone exception is Curry, who hits a relatively routine three-pointer (for him), but I was able to get such a low serial that I didn’t mind.

I still have a few moments to sell, but have more than doubled my initial investment with all of the above already in hand. Here are some players/moments I’ll be targeting in the marketplace going forward (in no particular order):

  • LaMelo Ball

  • Tyrese Haliburton

  • James Wiseman

  • Nikola Jokic S1

  • Bradley Beal S1

  • Kyrie Irving S1

  • Immanuel Quickley (whenever he gets a moment)

  • Trae Young January 6, 2020 Handles

  • Zion Williamson S1 Block or S2 Dunk

  • Anthony Davis S1 Dunk

  • Kawhi Leonard S2 3 Pointer

These are some more highly entertaining players, and moments that I would find value in keeping for myself, in addition to what they may offer in the market. This is the kind of portfolio I would like to build for the long run on what I still believe will be an immensely successful platform.

Note that none of this constitutes as trade advice. I am merely being transparent in my process for the entertainment of my readers. Hopefully you are enjoying following along!