Pudgy Penguin - The most asymmetric opportunity in the NFT space? (2024)

This crypto cycle is unlike any other. With so many new projects and trends that fade quicker than New Year's resolutions, it has become much more complex to navigate the various ecosystems and identify true gems to hold. But for anyone who’s spent enough time studying this bull run, it is becoming clear that the common denominator of successful projects in this cycle is threefold: culture, community, and team execution.

With that in mind, there is a strong case to be made that the most asymmetric opportunity of this cycle will be projects with the strongest culture, best community, right team execution, and that fall into the right narrative. For us, this is Pudgy Penguins, a blue-chip NFT collection of 8,888 unique collectible penguins and in this paper, we will explore the bullish case for this project.

The story of the Pudgy

To better understand the investment opportunity behind this NFT collection, it is important to first understand its story. Because, ultimately, we, humans, are emotional beings driven by stories, and a powerful story can act as a powerful catalyst.

In that sense, the story of the Pudgy Penguins is particularly compelling. Originally founded in July 2021 by Cole Villemain and Clayton Patterson, the project initially generated a lot of noise in the NFT space. The launch was remarkably successful, with Pudgy Penguin NFTs minted for 0.03 ETH and selling out within 20 minutes. But while the initial roadmap seemed promising, it was really all dust, as the founders failed to deliver on their promises and even tried to use the project funds for themselves. These controversies led to a lot of uncertainty and despair around the future of this project and the community got a real stress-test.

The Pudgy thesis

Ultimately, a successful NFT investment, like all tradeable investments, boils down to two things: a lot of people want to buy the project (big demand) and not many people want to sell (lack of supply). In this part, we will look at why we believe that this is happening for Pudgy Penguins.

Market forces are aligned

A market rotation to blue-chip NFT

As discussed, we are currently in a bull run fueled by culture and community, and a significant amount of wealth has been created on-chain, particularly in meme coins, which have been the most asymmetric sector of crypto in recent months. Following this, there is a strong case to be made that a significant portion of the excess returns from speculative bets on crypto culture will be recycled into scarce assets within the crypto economy as a means of storing value on-chain.

For this reason, we anticipate a market rotation from meme coins to blue-chip NFTs. Specifically, we believe that blue-chip NFTs representing crypto culture the most, and those with the strongest communities, will attract the majority of this new marginal demand. One such example is Pudgy Penguin.

In the same way, this rotation into blue-chip NFT could also happen from ETH holders who want to store their wealth in scarce assets within the ETH economy as ETH appreciates in value.

A high-beta play on Ethereum

Pudgy Penguin is part of the Ethereum economy. And in the Ethereum economy, everything is priced in ETH. This implies that Pudgy Penguins could benefit directly if ETH price rises as for many, like Darry Wang the Co-Founder of Tangent, Pudgy Penguins are a reasonably good ETH beta.

This is really attractive because ETH is in a strong position to be a leader of the next wave of this bull market, especially with a new ETF down the road, which would likely act as a major price catalyst, at least in the medium term.

Luca Netz - A man with a plan

Above all else, Pudgy Penguin is also a bet on a tier-1 team, with its leader Luca Netz standing as a pillar to this project. Much like Steve Jobs was the key figure behind Apple's success and its transformation into an iconic brand, we believe that Luca possesses all the necessary qualities to build the world’s next major legacy brand in Web3.

Luca's story is unique and inspiring. After dropping out of high school at the age of 16 to support his mother financially, Luca built his first business at 18 and became a millionaire by 19. He then pursued larger-scale ventures, notably at companies like Von Dutch, LPT Technologies, and Gel Blaster.

Over the years, he has established himself as a true brand and marketing master who understands the Web3 culture and the power of vitality more than anyone else. Moreover, Luca is also one of the most active leaders in the space, accounting for around 3.75% of the social presence in the entire NFT space in the last month, according to NFT Inspect.

Now, when we coupled all of that with his proactiveness and vision we believe that he and his team are one of the biggest assets behind Pudgy Penguins.

A strong and supportive community

The Penguins are well-known for being one of the most inclusive, cool, culturally rich, and forward-thinking groups in the NFT space. Over the years, despite all the FUD (Fear, Uncertainty, Doubt), they have been truly battle-tested and have emerged as a caring and resilient community of long-term holders who are dedicated to the brand. As the saying goes, “What does not kill me makes me stronger.”

Today, everyone loves them, and they are one of the preferred collections of many of the biggest builders in crypto, such as Alex Svanevik (CEO of Nansen AI), Luke Belmar (CEO of Capital Club), James Wo (Founder of Digital Finance Group & Jsquare), Ivan on Tech (CEO of Moralis), and many more who are showing a lot of enthusiasm on the project.

In fact Pudgy is pretty much a consensus amongst crypto natives, especially the big builders who as a result are less likely to sell the pudgy NFTs as they are not here for a quick gain (remember that a lower likelihood of selling is as important as a high buy pressure).

Enormous social media presence

The brand awareness of the Pudgy via social media is huge and they are leveraging Luca's past experience in sending content viral on social media. As of writing, it has 1.5 million followers and hundreds of millions of views on Instagram, 150 thousands followers on X, and over 20 billion views on giphy gifs which are integrated with Microsoft teams, Telegram, and Whatsapp, with many people using those gifs without even knowing that their favorite pengu characters are derived from an NFT collection.

A Gold mine of opportunities

This NFT community can also be seen as an inner circle of holders who get access to exclusive deal flows, high reward airdrop opportunities, and many more alphas.

The big Pudgy's already collected a 5 figure airdrop from projects such as Dymension, and are likely to be soon airdropped another 5 figure from zkSync (Pudgy World built on ZKSync) and from LayerZero (the LayerZero Founder is a Pudgy Penguin Holder and so are all of the LayerZero team members). Without a doubt this makes this collection a true gold mine for your portfolio over and above the asymmetric upside potential of the NFT itself.

More than a simple NFT, an entire business

Pudgy Penguins is not just an NFT collection. It is the first mass-market NFT IP product licensed directly from the community and aims to build a legacy in the consumer product space with Pudgy Toys.

The Pudgy Toys range includes various items, from stuffed penguins to figurines. Each toy comes with a QR code that grants access to Pudgy World, an immersive multiplayer digital environment. In Pudgy World, users can explore, play games, and customise their Forever Pudgy character. The best thing is: NFT holders earn 5% royalties on net revenues from sales of the physical products featuring their unique Pudgy Penguin. This means that Pudgy Penguin NFT holders earn a yield on their NFT, which comes directly from real world money (the sale of the Pudgy Penguin products).

The Pudgy IP is cute and universal and can easily appeal to different social groups across all age ranges. Hence, it is no wonder that Pudgy Toys have been a true success, with over 1,000,000 toys sold in the last 12 months. The Penguins have even made their appearance on the shelves of over 3,100 Walmart stores in the US. But this is only the beginning, and Luca plans to expand to many more markets in Asia and beyond. In fact, the brand has already partnered with one of the biggest conglomerates in South Korea, Lotte Group, as well as the biggest retail chain in Australia, Big W, and many more of those partnerships are expected.

With Web2 execution and proactivity, combined with Web3 values and ethos, the Pudgy Penguins brand has the potential to become the next big thing in consumer products. In the future, it wouldn’t be surprising to see it competing with the likes of Mickey Mouse or Hello Kitty.

Pudgy - The new Bored Ape?

In the 2021 NFT mania, the Bored Ape Yacht Club (BAYC) NFTs by Yuga Labs were the clear leader and captured all of the market's attention.

More than just cool cartoons of primates, BAYC became popular because they pioneered a new meta for NFT collections: a new type of digital identity that gave access to a sort of community membership via gamification, IP rights over the NFTs, exclusive club merch, private festivals, access to airdrops, and much more. It was an entirely new model that was being created. But while the idea was golden, the team didn’t manage to execute their mission as they should, nor build the right back-end infrastructure and processes, and slowly, the BAYC lost a bit of traction.

As with many new models, it is not always the pioneers who thrive the most. Often, it is the ones that come after, learn from past mistakes, and arrive with a clearer mission and better execution, much like Google captured all the market share from Yahoo back in the day. In that sense, the Pudgy Penguin is exactly that: a better Bored Ape with more cute and universal IP, a tier 1 team, actual revenue, contracts with the biggest retail businesses in the world, and the largest community of builders in crypto.

This is why we believe that Pudgy Penguins has all it takes to create a new meta for NFT - the first one that truly lasts and finds genuine product-market fit and with that comes a tremendous asymmetric upside potential.

Valuation and Scenario Analysis

To estimate the potential future price of a Pudgy Penguin NFT, we can use different methodology to try and come up with a range of value based on Web3 and Web2 comparable as well as prediction from different experts in crypto.

Web3 comparable - Bored Ape Yacht Club

If Pudgy Penguins has all it takes to become the Bored Ape (BAYC) of this cycle, then it makes sense to use them as a reference to try and estimate the potential of the Pudgy Penguins. For this, we can look at the all time high (ATH) price of the Bored Ape NFT during the last cycle to derive the implied price per Pudgy Penguins:

Web2 comparable - Walt Disney

Another way we could value the Pudgy Penguin collection is by comparing it to a major Web2 comparable: Walt Disney.

The Walt Disney Company (DIS) has a current market capitalisation of approximately $187.79 billion, with total revenue in 2022 of $82.7 billion, of which $5.3 billion came from its consumer products segment (6.4% of total revenue).

For simplicity, if we assume that the market capitalisation of the consumer products segment is 6.4% of its total market cap, we arrive at an implied market capitalisation of roughly $12 billion for the consumer product segment of Walt Disney. Now, if we assume that Pudgy Penguins has the potential to become a major cultural brand driven by its consumer products segment, we can derive different potential valuations for the Pudgy Penguin collection based on the percentage of Walt Disney's consumer products market capitalisation that it can achieve:

Crypto experts price prediction

Lastly, it can also be interesting to take into account the price prediction of different crypto experts to have a sense of how high Pudgy Penguins could go in the most optimistic scenario. And here, the consensus seems clear:

• Luke Belmar - CEO of Capital Club: $1 million per Pudgy Penguin
• Alex Svanevik- CEO of Nansen AI: $1 million per Pudgy Penguin.
• Casper Johansen - Co-Founder of The Spartan Group: $1 million per Pudgy Penguin.
• James Wo - Youngest crypto billionaire & Founder of Digital Finance Group: $1 million per Pudgy Penguin.
• Darryl Wang - Co-Founder of Tangent Group: $300-500k per Pudgy Penguin.
• Luca Netz - Owner of Pudgy Penguins: 200 ETH ($2M if $10K per ETH) per Puggy Penguin. Luca's reasoning is that, in addition to all the value propositions of this collection, leverage will be another catalyst that will send the best NFT collections to the moon, especially with the different NFT leverage platforms that could have a high impact on the upside of the prices of the main NFT collections.

Wrapping it all

Using all of those different valuation techniques, we can derive different estimate for the price of a Pudgy Penguin:

Throughout this paper, we’ve seen how this collection ticks all the boxes of a successful project and why there is a strong case to be made that the Pudgy Penguins are one of the most asymmetric opportunities in the NFT space.

Now, with SwissBorg, you will have the chance to invest in Pudgy Penguin NFT. Coming soon - Don't miss out on this unique opportunity.

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