An ETH earning asset to hedge against ETH risk

I have been sucked into the crypto world during the Covid lockdowns when most of my other past-time activities didn?t take place. This means that even in the middle of this major downturn, I still have a few positions that are in the green and since I had not planned on selling my crypto any time soon, I?m relatively relaxed compared to most of the people on Reddit or Twitter.

Another reason for my calm is the fact that a substantial amount of my crypto is in an asset that seems to be pretty unimpressed by the current selloff.

I have written about my interest in the fantasy football game several times and the current market conditions offer the perfect case to do so again.

I will first give a brief overview of Sorare and then explain why Sorare cards might act as an ETH hedge despite earning you ETH.

Sorare is a fantasy football game in which you buy, sell, and play cards of your favorite football players (and players you?ve never heard of before but will grow to love). If you are successful, you are rewarded in additional cards as well as in ETH.

The amount of ETH you can earn depends highly on your strategy but, from my experience, a steady 0.01 to 0.02 ETH per week is certainly possible apart from the weeks where most leagues are on a break.

With a trading volume of more than $300m in 2021 and sports legends like Serena Williams on their board, Sorare has become one of the major players in the Ethereum ecosystem. Outside the crypto universe, in the “real world”, Sorare is a respected company that has received $700m in funding from top-notch investors and a valuation of around $4bn.

Sorare is played by selecting a team of 5 players for a variety of leagues that then score based on the players? real-life performance on the pitch.

signing up, you receive a number of free “common” cards that can only be played in a few leagues (ad can?t be traded) and from there, you have to either play your way up to “limited”, tradeable cards (which is a very hard way to go) or purchase tradeable cards with more utility.

Once you have assembled a team of at least 5 “limited cards” (or 4 “rare” cards + 1 “common” card), you can start to compete for ETH prizes. As an example, you can see the prize pool for the “Under 23 limited” league below.

While it is possible, at least in theory, to play Sorare just with the free cards you receive at the start, you will need to invest some money if you want a realistic chance to generate cash flows from Sorare.

To me, the most promising way to earn while playing Sorare is to field a team in the “All Stare Rare” league. The reason for this ar the “threshold rewards” you receive for scoring a least 205 points.

This means you don?t need a team that can outcompete the other players but you “only” need a team with a realistic chance of scoring >205 points.

Sorare as ETH Hedge

Now to the interesting part, at least for the purpose of this article.

There has been a discussion amongst Sorare managers throughout at least all of 2021 on how fluctuating ETH prices compared to fiat money impact card values on Sorare.

While there is no definitive answer to this, great research by @t3comah suggests that 65% of Sorare users either don?t care about ETH or see Sorare as an outright hedge on ETH fluctuations.

This suggests that a majority of users will price their cards in fiat when ETH drops and thus raise prices for the cards they are selling. 

I can also confirm this theory in practice, based on my own Sorare gallery which has been valued at just over 1 ETH at the start of the year:

I am super happy with how this has developed even as most of my other crypto assets took a massive nosedive. However, I must say I find this somewhat nonsensical since the utility of Sorare cards, from a purely financial standpoint, is their ability to generate ETH cash flows.

Conclusion

Whether or not you agree with the theory of Sorare cards as an ETH hedge is something you need to think through for yourself.

Personally, I am in the weird situation of finding the theory illogical and true at the same time. The only way to reconcile this is to think that people invest in Sorare cards for a reason other than generating ETH cash flows (as can be observed in physical trading cards as well).

If you want to try Sorare now, I am currently running a giveaway for people signing up via my invite link. For more information, please have a look at this article