What if your kid’s pokemon and baseball cards aren’t actually a waste of money, but valuable financial assets worth thousands of dollars?
Not long ago, trading cards were considered little more than a hobby. But in 2019, the global sports trading card market was valued at more than $13 billion. It’s projected to reach $98 billion dollars by 2027, according to a report from ResearchAndMarkets.com, the world’s largest market research store.
And that doesn’t include non-sports trading cards like Star Wars or Dragon Ball Z cards. Pokémon, for example, saw sales increase by more than 500% last year, according to eBay.
What was once a pastime for elementary school kids is now becoming a major investment opportunity. That’s why Josh Luber, founder of billion-dollar sneaker marketplace StockX, just launched a new trading card company called Zerocool, that creates trading cards of pop culture icons in the hopes of attracting new users to the sector.
Luber is betting that trading cards have huge potential for profit, just like NFTs.
“There are a lot of similarities between NFTs and trading cards,” says Luber. “These are financial assets that are supply-and-demand-driven, they have market-based pricing unlike consumer packaged goods, and they have long-term value as a collectible and an asset.”
A bubble that burst and slowly reinflated
When sports trading cards gained huge popularity in the late ‘80s, manufacturers got excited and started flooding the market with more cards. But when eBay launched in the ‘90s, consumers quickly found out that the cards they thought were rare were actually common, and there was an oversupply.
That led to a crash in demand, and the industry imploded and stagnated for the next 20 years, Luber tells Fortune.
The COVID-19 pandemic changed all that. There was a resurgence in trading cards enthusiasm when people were quarantining and trying to reconnect with their old, forgotten hobbies, according to CNN.
But Luber dismisses COVID’s role as overblown, saying trading cards had started gaining traction well before the pandemic.
“At the beginning of 2018, my whole generation who grew up with trading cards was now reaching an age where we have more disposable income combined with trading cards becoming standardized assets.”
The standardization of trading cards and why that’s important
Companies that evaluate and authenticate trading cards have been around for decades.
For example, Professional Sports Authenticator (PSA), the world’s leading card grading company, was established in 1991. It ranks the value of cards based on their condition and packaging—essentially transforming them into assets that can be flipped for profit. But new companies have popped up over the last few years, including Beckett Grading Services and Global Authenticators International.
A card’s quality is determined by industry-set criteria and graded on a scale of 1 to 10, which is then combined with the card’s popularity and rarity, which ultimately determines how much it’s worth.
This method of valuing objects extends to other collectibles like toys and video games, Luber added.
“The same way that I can sell you a share of Nike stock without having to show you, I can sell this Zelda video game to a collector without having to show or explain it to them. It’s a standardized asset and they’ll know where it comes from,” explained Luber, pointing to his original “Legend of Zelda” 1988 video game, graded at 7.5 by another authentication company, Wata, which specializes in valuing video games.
“A sealed Zelda graded at 9.8 just sold for almost a million dollars at auction a couple of months ago,” he added.
Trading cards are like IRL NFTs
The appeal of NFTs and trading cards doesn’t just come from their relevance to popular culture but comes from their scarce nature. For people, it’s about owning something rare that few others have, says Luber.
“Trading cards tell a story of a time and place and people,” he says. “The right NFT projects start to do the same thing, where you tell a story around a certain topic and people and group.”
Just like NFTs are verified by the blockchain and flipped for huge profits, companies like the PSA authenticate and standardize trading cards, making them financial assets with massive investment potential.
Luber gave the example of a mint condition Michael Jordan Rookie card which was worth about $50,000 in 2020 and ended up selling for $738,000 at the beginning of 2021.
That’s a 14x gain in one year.
So, how can rare cards maintain their value if companies continue to produce trading cards?
Zerocool is in the business of creating new trading cards. But it also wants to create cards in a class of their own that create demand without flooding the market.
“That’s the question. How do we 10x the market, 50x the market without creating oversupply and ruining the value of the cards? There’s a big paradox there,” says Luber. “There’s not an easy answer. The answer is we have to become more creative.”
Zerocool is shifting away from traditional sports and creating cards centered around the world’s most popular people and brands.
Their first release was a highly-limited collectible trading card set based on Gary Vaynerchuck’s famous NFT project, VeeFriends. It generated over 22,000 bids on 800 trading card sets.
A box of VeeFriends cards was sold by Zercool for $2,150, and are now reselling for up to $20,000 on eBay.
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