A Brief Discussion on the Metaphysics of NFT Rarity: A High Rarity Score Does Not Equate to High Price or Better Liquidity

Author: Planet Little Flower

Source: Odaily Planet Daily

When we purchase NFTs, some purely financial investors may choose to "sweep the floor," sorting by price from Low to High and buying in bulk at the lowest prices, waiting for the floor price to rise. Meanwhile, more ordinary people buying avatars for their profile pictures will consider various comprehensive elements, wanting to buy something "good-looking," "cost-effective," or "the cheapest among the rare ones."

In this decision-making process, investors generally refer to rarity ranking websites, such as Rarity Tools, Rarity Sniper, HowRare.is, NFTGO, etc. These websites rank all individuals within an NFT series and break down the rare elements of each NFT to score them.

When we say this, the reasoning seems quite straightforward: the more rare elements an NFT possesses, the rarer it is, and thus the more valuable it becomes.

But in reality, the algorithm for rarity is not that simple. The real market value of NFTs is not entirely positively correlated with the so-called rarity score.

Why is it ranked so high?

Let’s take an example. The image below shows the rarity ranking of the top 10 Bored Ape Yacht Club NFTs according to Rarity Tools.

You might be a bit puzzled looking at this; 2 and 3 don’t seem that impressive, so why are they ranked so high? Let’s take a closer look at this second-ranked bored ape.

First, Pizza is a rare element; only 0.26% of the apes have Pizza, which amounts to 26 apes, so that’s easy to understand.

The next Trait Count represents the number of Properties on Opensea, and this ape has 4. In the rarity calculation of apes, the general website ranking is 4, 7, 5, 6. This means that the ape with the fewest elements is the rarest, while the one with the most elements is the second rarest. In short, the baldest ape is worth more than the one with the most complex attire.

In fact, most NFTs also refer to this kind of ranking method. So you can see many simple styles ranking at the top of each series. This ape ranks second because it has no clothes, no accessories, and a relatively rare background color and eyes.

However, for most high-priced NFT buyers looking to showcase their identity, buying this so-called second-ranked ape might not be as good as buying one with a gold skin or laser eyes, which have highly recognizable explicit elements.

In my own words, it’s about "using rarity wisely." For example, in the image below, two Azukis ranked 18th and 19th on the ranking site, the real market value of the latter is certainly much higher. This is because the latter's Type is Spirit, an element that can be recognized from ten meters away, which is definitely more popular than the former.

Liquidity Determines Good and Bad

Last August, when the floor price of BAYC was 40 ETH, a friend asked me if this ape, being "the cheapest among the rarest," was worth buying, as its asking price was 67 ETH.

I quickly reminded him not to buy it because "red hair" is the least popular element in the BAYC community. Although this ape has some relatively rare elements, they are not rare enough. At that time, there were other apes with the same asking price that had "explicit elements" like gold teeth or rainbow teeth, which were better options.

Another unpopular element is "crazy eyes" (Crazy), which is the eye style of the second-ranked ape mentioned earlier. It’s hard to explain the reason behind this. According to rarity, they are not the worst elements; it’s just a long-standing aesthetic and value perception formed within the community.

Therefore, when you look at the listed BAYC floors, you will always see quite a few with crazy eyes and red hair.

There are many similar situations; for example, in Crypto Punks, women and people of darker skin tones always rank at the floor positions, but according to rarity, they are not the worst. This is frustrating but also represents the truth of liquidity.

A high rarity score for an NFT does not mean it can sell for a high price or has liquidity.

Changes in Market Factors

Although there are many established community aesthetic tendencies in NFTs, as more newcomers enter the market and they become mainstream, these factors will also change.

One reason for the high and stable price of BAYC is the endorsement from numerous celebrities. Many celebrities adopt a "wealthy and willful" style and do not need their NFTs to be particularly rare.

For example, not long ago, rapper Eminem splurged 123.45 ETH to purchase this BAYC, mainly because it "looks like him." According to Rarity Tools' rarity ranking, this ape is ranked 5325, which is below average, while the floor for BAYC was 67 ETH at that time, making this ape clearly overpriced, but Eminem certainly wouldn’t care about that.

From another perspective, if one day this ape is resold, there will definitely be many buyers eager to get it, as it is an ape endorsed by Eminem. The logic is similar to how famous paintings can command a premium due to their past collectors.

After Eminem entered the scene, not only did the floor price of BAYC rise by 10 ETH that day, but the value of the white-skinned apes also increased, making the appeal of "celebrity lookalikes" quite understandable.

The example of Curry is similar; the blue-skinned ape was originally not a sought-after element in the BAYC community, but due to NBA superstar Stephen Curry's involvement, BAYC experienced a genuine global viral marketing wave, becoming a trending topic on Twitter and TikTok, and this blue-skinned little ape became an iconic image, naturally causing the prices of blue-skinned apes to rise for a while.

Another interesting example is that after the Mutant Serum airdrop, some elements in MAYC's mutation effects also influenced the prices of BAYC.

For instance, before the mutant apes appeared, the colored teeth (1%) element was not particularly popular and did not have a price higher than the golden teeth (0.91%), but the colorful mutant apes were very beautiful and had outstanding effects, causing their prices to soar, surpassing even the golden-toothed apes that were originally rarer than them.

Having said all this, you probably understand that the rarity of NFTs is indeed a mystique.

In summary, if you are not a professional investor, I have two suggestions: one is to buy what everyone likes, and the other is to buy what you like.

The former can refer more to historical transaction data for liquidity assurance; the latter provides self-comfort during market crashes and zeroing: at least I think it looks good.