GM frens,

In today's edition of The Ground Floor we will be breaking down the mistake(s) made by the RTFKT team during their Monolith 2 reveal this week.

P.S — The Ground Floor will be published 3x weekly moving forward 🥳

RTFKT's $40 Million Mistake

Breaking down the costly mistakes made by the RTFKT team....

Floor prices = feedback loops for founders.

When the floor price of a collection increases, it can be interpreted as increased confidence that a project will continue to succeed and deliver value back to its token holders.

Conversely, when the floor price of a collection declines, it can be interpreted as decreased confidence that a project will continue to succeed, with diminishing value expected for token holders.

High Expectations

CloneX by RTFKT is the 6th most successful NFT collection by transaction volume.

To date, RTFKT has delivered some outstanding experiences to its token holders & following Nike's acquisition of RTFKT in 2022 — collector confidence continued to soar.

To add fuel to the fire, RTFKT recently released its second 20,000 collection called project animus that brought many new collectors into its ecosystem.

Following this successful drop last week, RTFKT turned its attention back to Nike x RTFKT Monoliths, an airdrop each CloneX holder had received after Nike acquired RTFKT.

Within the community, expectations were high.

The Mistake(s)

RTFKT made two key mistakes when they opened the Monolith 2, and revealed that it contained a piece of technology needed to purchase the "first Web3 native shoes".

1) They announced that these shoes could only be shipped to the United States.

It should come as no surprise that the RTFKT community (that I am a part of) was extremely frustrated with this news with many tokens holders being located outside the United States.

Since May 2022 when the RTFKT team announced the Monolith 2, token holders had the opportunity to sell this asset for many thousands of dollars, however, they chose not to under the impression that they would be eligible to participate in the drop.

Evidently, this was not the case — which brings us to the second mistake RTFKT made.

2) They drove attention to an asset worth $1,450.

This attention drove up the price of a Monolith 2 to $2,200 USD, only for RTFKT to announce the following day that this asset was effectively worth less than $350.

Why is it worth so little?

RTFKT announced that the Monolith 2 provided holders with a discount on the upcoming Web3 native shoes that contains the technology needed for its move to earn game.

Token holders will still have to pay $450 - $1,000 USD to purchase the shoes.

Following this announcement, the value of Monolith 2 dropped 89% from 1.75 to 0.18 (at the time of writing) as collectors re-evaluated the true value of this once coveted asset.

$40 Million In Damages

Before these mistakes were made, the collective value of the Monolith 2 collection was 1.75 ETH (floor price) x 20,000 (collection size) x $1,200 (price of ETH) = $42 million.

Following these mistakes, the value of the Monolith 2 collection is now = $4.32 million.

The value destruction to Monolith 2 on its own amounts to $35.28 million, however, factoring in the reduced floor price of both Clones, Animus Eggs & Monolith 1 — the total value destruction caused to the RTFKT NFT eco-system certainly exceeds $40 million.

This is a bill the RTFKT community will have to bear the burden of.

📡 Looking Forward

The mistakes made by RTFKT this week exemplifies that even the biggest brands in Web3 are struggling to create realistic expectations for consumers.

Nonetheless, every mistake can be corrected.

Today, it's unclear if the proposed solution from the RTFKT team will be sufficient to solve the problem they have created with their mis-management of expectations.

RTFKT collectors' trust in the Monolith drops has plunged to an all time low, and the idea that dropping a new "Monolith" with unknown utility to save this situation is unconvincing.

That said, Nike, the parent company of RTFKT has a market cap of $168 billion and if anyone is uniquely positioned to pull on the resources required to right this wrong — it's RTFKT.

With this in mind, I am personally still bullish on the RTFKT eco-system & remain optimistic that their leadership team will successfully resolve the problems they created.

✔️ The Lessons Learned

1) Web3 is global. Communities that neglect the needs of their token holders outside the United States will inevitably loose members.

2) Over-hyping assets is a set up for consumers feeling disappointing.

3) Even the most successful brands make mistakes when navigating Web3.

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Writers holdings: At the time of writing I own a number of assets in the RTFKT eco-system including 1 Clone, 3 Animus Eggs, 1 Kryptokick & 1 Monolith 2 (now Trillium Lace Engine).

See you next time! — OB1

This newsletter is for informational purposes only and does not constitute financial or business advice to any person or entity.