Liquidity, Scarcity, Inventory

Notes on Collecting Crypto Art, Chapter 3

Part of my Notes on Collecting Crypto Art series.

Chapter 3 - Liquidity, Scarcity, Inventory

A lot has been made of “the scarcity debate” within the Crypto Art community, so I may be a little late to the party here.

Overall I think it’s very endearing to see it discussed the way it has been, because in many instances these are Artists who likely have no formal markets and economics background having to figure out liquidity and tokenomics from first principles - and on balance I believe learning a topic from first principles is the best way to actually have it “stick.”

There’s definitely a lot of “reinventing the wheel” going on, but I think it’s actually a good exercise for the Crypto Artist community to build this knowledge from the ground up, so that they can figure out why it works the way it does instead of just being told by that “crypto commercial class” I’ve referenced previously.

The TLDR - and many artists have learned this the hard way - is that basic market principles are essentially natural laws. Try as you might, you cannot dictate terms to the market, you can only adapt to what the market is telling you.

Supply, demand, liquidity, scarcity, and inventory all impact an artist’s ability to sell - whether the artist wants to acknowledge them or not.

Listen to the Market

One of the biggest mistakes I see artists make all the time when they come to ask me for help is that they sit on too many unsold pieces (inventory) while insisting on a price above what the market seems willing to pay at that given time.

Often this happens because an artist either

  1. insists on pricing all their unsold inventory at whatever their latest or highest sale price is (especially when the last sale at that threshold happened a long time ago), and/or

  2. keeps minting new inventory at a rate that exceeds what they are able to sell, thereby accumulating unsold inventory.

This situation is incredibly commonplace and is almost a textbook definition of asset over-pricing.

The Unsold Ratio

Indeed, when I actively explore a new artist that I am considering collecting, a key step in my process on SuperRare is to:

  1. Click on profile

  2. Click `View all artworks created by @artist`

  3. Look through their created works

  4. Observe how many total works the artist has minted (upper left corner)

  5. Click the `Owned by creator` toggle

  6. See how many unsold works the artist has and compare it to the total works

The ratio I essentially look for is:

Unsold Work / Total Work

Indeed for many of my favorite artists that have seen tremendous success on SuperRare, their Unsold ratio is - as of this writing - incredibly low:

Pak: 3 / 76 = 4%
FEWOCiOUS: 1 / 16 = 6%
Totemical: 1 / 36 = 3%
Glass Crane: 2 / 53 = 4%
Android Jones: 1 / 14 = 7%
Giant Swan: 0 / 54 = 0%
Parrott_ism: 2 / 32 = 6%

Note that as the amount of total work grows higher, the number becomes more useful and the ratio generally goes down. I don’t think that anybody doubts Fewocious and Android Jones’ ability to sell the inventory if they needed to, their numbers are only slightly higher because their denominators are lower.

Btw, since I’m sure there are going to be a lot of nitpickers about this section, there are clear exceptions to this rule (“BOCTAOE”), so I’ll name probably the most notable one, Frenetik Void, whose ratio is 21 / 60 (35% unsold) and who still seems to enforce a very high pricing threshold. If you are comfortable stacking your skill and reputation against FV, then go ahead and just ignore this section!

If you want to make the heuristic even easier, you probably don’t want more than 3 pieces for sale on a single platform at once.

Whether consciously or subconsciously, many collectors look at sales signals when thinking about an artist’s overall value.

The Effect of Inventory on the Secondary Market

Back to the main thread, as a collector, the reason that unsold inventory is so critical is that primaries and secondaries happen in the same marketplace and most collectors vastly prefer to buy directly from the artist (primary).

Even the collectors that have no near or intermediate term intention of selling in theory want to know that an exit is later available if they need to sell. The optimal condition to do this would be if the artist’s work that the collector is trying to “offload” is very hot and very scarce - in these conditions a collector can easily make their money back (and then some!) because demand is high and supply is low.

However, when artists have a bunch of unsold inventory, the collector trying to offload the work now has significant competition directly with the artist in the market for that artist’s work.

Thus, meaningful Unsold Inventory is a key limiting factor to the prospect of an artist developing a secondary sale market - and thus collectors may altogether avoid entry if there is evidence to suggest a later exit may be difficult.

There are a distinct handful of artists that I am actively watching who I would potentially want to collect more of, but who have rampant “inventory crises” that remain unsolved (40%+ unsold inventory over a large body of work) and thus their value becomes impacted.

Controlling Inventory Does Not Mean You Should Stop Making Art

To be clear, I am not advocating that artists flippantly price their work low, nor am I advocating that they stop making work until after they clear their inventory.

To be a Great Artist requires a mastery of craft; to be a Great Crypto Artist requires a mastery of digital art AND a mastery of supply/distribution. The Token and the process of minting and distributing The Token - the tokenomics of it all - is part of the work itself.

A Great Crypto Artist understands the difference between creating art and minting art, and knows that the latter should be done much more selectively and strategically.

Ideas to Manage a Glut of Inventory

Getting pragmatic again, Unsold Inventory is almost universally the main issue plaguing the artists that come to me asking for help. A few strategies to address this, though really it’s not my place to tell you which one is correct.

  • Lower Prices - This one should be obvious, but if the market is telling you you are over-valuing your work, the move is very likely to bring it down just a bit. Inch things down a little bit until you start to discover a more reasonable price threshold, then treat this as a new baseline from which to start pricing your work (and then try to build upwards).

  • Burn - I personally HATE this outcome, but it will very quickly and literally solve your inventory problem. Potentially works well if you are an artist switching platforms (e.g., burning your unsold Rarible inventory after getting accepted to KnownOrigin/MakersPlace/SuperRare).

  • Gift - Better than burning, definitely, but also you “lose” a work without getting a direct tangible return. You can think about gifting as an act of generosity, as an act of strategy, or an act of psychology:

    • Generosity - someone will be very honored to receive it, it’s very nice of you.

    • Strategy - get your art into a notable collection so that it increases your profile.

    • Psychology / PsyOps - give it to a collector who will be awkward about receiving a gift and he or she will very likely follow your career more closely going forward and potentially even feel obligated to purchase a future work - probably not done in the best intention or spirit, so be careful with this one.

  • Prize / Giveaway - Outside of the actual creation part, Crypto Art also involves promotion and distribution, so having a larger following over time is likely weakly correlated to future success. Thus, instead of burning, you may try to do some sort of social giveaway with the work to gain a larger audience.

    Twitter avatar for @frenetikvoidFrenetik Void @frenetikvoid
    🛑FOLLOW ME - PLZ 🛑 🤜🏻 Ill gift this 1/1 Void to a random person in 1 week. (🎄🎁) @SuperRare In order to participate you gotta: LIKE, FOLLOW ME, RT, TAG3FRIENDS \ #LIKE, #FOLLOW #ME, #RT, #TAG3FRIENDS , #FOLLOW ME, RT, T08913e7g1bo3i4iub$!%cs1|! ImageImage
  • Trade - This one is probably my favorite and I wish I could find the person I saw originally propose this idea on Twitter so I could credit them. It’s a very Strangers on a Train idea, but essentially if you are an artist with an unsold inventory problem and you know of other artists in your network with the same problem, ask to do trades with them so that you can have their work in your collection and they can have your work in theirs. In this way you both reduce unsold inventory, while getting your work in the hands of other credible Crypto Art community members, and possibly get an asset in return (the other artist’s art). It’s the most dignified save-face and allows Artists to build each other up. I hope more Artists explore this option.


Artists that have a bunch of unsold inventory are skiers who are a bit ahead of their skis, but it’s definitely a fixable issue.

This is definitely not an unsolvable problem, but Artists having the problem should acknowledge that getting past it will dramatically help them move forward.

You can’t instantly start pricing work at the top, you need to build towards higher values with continued skill refinement and incrementally higher sales.

-Colin Goltra, February 2021

Part of my Notes on Collecting Crypto Art series.