NFT

NBA Top Shot Challenges: Are They Worth It?

Are those NBA Top Shot challenges worth the investment? We will answer that burning question for you.

One of the most notable features of the NBA Top Shot system are the challenges. Most of you probably know what they are, but if you don’t, here is a primer:

When Dapper Labs releases a new Top Shot pack, they often will issue a challenge. If you complete the challenge within the allotted time-frame, you gain an exclusive moment.

The challenge is to buy a particular set of moments, usually five or ten, and hold on to them until the clock expires.

Simple! But investing in them profitably is anything but.

The Prize

On the face of it, pursuing a challenge makes sense. You are collecting Top Shot moments anyway. Top Shot has promised they will not issue prize moments outside of challenges, so they are likely to be quite rare.

If so, why not get them in an order that allows you to get an exclusive moment that is going to be worth quite a bit due to its scarcity?

NBA Top Shot Challenge Inflation

However, the Top Shot marketplace is not that simple. Just like any high-stakes bazaar, individuals hedge bets on the value of moments. In this case, moment speculators seek out the ones involved in challenges and drive up their prices.

Some speculators sell off their moments very close to the challenge deadline when those pursuing the prize are trigger happy.

The result of this particular set of market incentives is that the moments involved in a challenge (not including the prize) will drop off dramatically after the challenge ends.

The math is simple. For a challenge to be worth it, the following math would have to bear out.

Price Of Necessary Moments 

<

Value Of Prize + Value Of Necessary Moments after Challenge Deadline

This sets a high bar for a prize to be worth the investment in a challenge.

A Top Shot Challenge in Action

Let’s look at one of the more popular challenges on NBA Top Shot in early 2021. The Gift Challenge ran from February 13 until March 2.

The prize was a Derrick Rose moment of the point guard executing a no-look pass in his first game back with the Knicks. Yeah, I choose this one because I am a Knicks fan. I need to comfort myself somehow.

So, what would a past collector have to do to win that challenge? They would need to collect moments from: CJ McCollum, D’Angelo Russell, Donovan Mitchell, Jimmy Butler, and Rui Hachimura.

Was participation in the challenge worth it? We gathered the data, so you won’t have to!

The five necessary moments were worth $428.02 when the challenge opened. The moments remained around that zip code for a few days before starting to shoot up on the 17-18th of the month.

At that point, the value of the moments participating in the challenge began to shoot up and up. They hit their peak on February 23 at $3,618.93.

Following the peak, prices started going down. The expected phenomenon of sellers waiting until the last second to raise prices did not materialize. Instead, it appears that sellers began to lower prices, hoping to make a profit before the inevitable crash.

The prize? A no look Derrick Rose pass.

What Happened When The Gift Challenge Ended?

When the challenge ended on March 2, the five necessary moments were valued at $1,665.69. At that point, those who completed the challenge won the coveted Derrick Rose moment.

Was it worth their while? Not for most. The prize moment went up in price the day after the challenge ended and peaked at $776.28. It then started to go down in price and stabilized at around $375.

Meanwhile, as expected, the price of the other moments involved plummeted to $652 within ten days. In other words, they had lost 60% of their value since the challenge ended. However, the moments were still worth more than they had been in the first few days of the challenge.

In the final analysis: The floor for this challenge was $1,027. What that means is that you had to spend less than that in order to turn a profit on the challenge. Only people who bought the moments in the first six days turned a profit on the challenge, mainly if they sold their cards before the Derrick Rose began to drop in value.

The people who made the most out of this challenge made around $1200. However, the people who lost the most took a bath to the tune of $2,600. And there were a lot more of those.

Data From The Gift Challenge Top Shot

You can view the data for yourself here. And by the way, thanks to everyone at rookshot.market for collecting this data. Consider giving them a donation!

Will an Anthony Davis dunk fare better?

Often NBA Top Shot Challenges are Not Worth It

We looked at the data from another challenge for comparison. The Cool Cats 2 challenge ran from February 20 to March 2, 2021. The prize this time was an Anthony Davis dunk. Honestly, I’ve seen better highlights in my day.

To get it, collectors needed to assemble ten moments. Right off the bat, that makes it less likely to turn a profit.

Indeed, the difference shows. While some of those who pursued the Gift challenge made a nice profit, the same was not true of the Cool Cats 2 challenge.

We saw the same general trends in terms of the price of the moments rising gradually and then dipping. However, there was less of a dip this time.

The significant difference is that the investment needed to participate in the challenge was consistently higher than the floor. Very few people made money by participating in the challenge, and some took a serious beating. How bad? $4,000 bad.

The relevant moments dipped even more than in the previous example. They were worth $3,105 when the challenge closed and were down to $1,200 within eight days.

If so, you can reliably expect relevant moments to lose about 60% of their value once a challenge ends.

You can view the data for this challenge as well.

 

Challenges in a Plummeting NBA Top Shot Market

Markets fluctuate, and value changes over time. As in any market, the prices are determined through a balance of supply and demand.

If you look at Top Shot moments’ overall value, they peaked on February 21-24 or so. Since then, prices have been trending downwards. Therefore, timing is of massive importance.

Therefore, if you owned most of the moments needed to complete the challenge before the surge in prices, most challenges will be worth pursuing. However, if you have to purchase most of the moments right now, the chances are that you will lose money.

When the challenges are ongoing, the moments required to complete the challenges increase in price.  Then when the challenge ends, they drop in price.

Therefore, as the market stands currently, you are more likely to make money by selling the relevant moments to collectors than by winning the prize.

When are NBA Top Shot Challenges Worth It?

Nothing in investing is quite that simple. There are a few situations where pursuing a challenge may be worth the cost and effort.

  • The moment is particularly valuable. If the prize is a Lebron or Luka, it is way more likely that the challenge is worth it, even if the necessary moments are pretty expensive.
  • You happen to have one or more of the most expensive needed moments before the challenge is announced and you intend to hold it regardless of the fluctuations in price from the Challenge.
  • Few people are likely to complete the challenge because the needed moments are rare.
  • The market changes and fewer people pursue challenges.
  • Challenges requiring fewer moments (i.e., five instead of 10) are more likely to be worthwhile.
A Lebron prize may be an entirely different story

Concluding Words on NBA Top Shot Challenges

Right now, the smart money is not on completing challenges. It is on buying up moments for challenges quickly and sell them to collectors trying to complete the challenges.

However, sitting on them until the last minute may not be the best strategy. Instead, it looks like the smart play is to sell 5-6 days after the challenge has started.

But don’t give up on completing challenges entirely. Once it becomes common knowledge that challenges are a bad investment, they may paradoxically become a good one by making the prizes rarer and more desirable.  Markets tend to correct themselves, and often overshoot on their corrections.

Hey, no one said investing would be easy.

 

Shaiel Ben-Ephraim

Shaiel Ben-Ephraim

Shaiel Ben-Ephraim is a former history and political science professor at UCLA. He has a PhD from the University of Calgary. Shai also worked as a diplomat and journalist on three continents.


[class^="wpforms-"]
[class^="wpforms-"]
[class^="wpforms-"]
[class^="wpforms-"]