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Making $100K Trading CryptoKitties


Ivan Bogatyy:

Next morning I called Oleg, a close buddy who runs a top crypto hedge fund in Russia to discuss this unusual phenomenon. While the CryptoKitties game was merely a curiosity for me, Oleg immediately spotted a lucrative investment opportunity. First, we were clearly among the earlier entrants. Second, the game looked like it had all the precursors of going viral, similar to Pokemon Go, and was in the early stage of a hockey stick explosion.

Now the question was, which Kitties should we buy? The marketplace offered 4 ways to sort Kitties: cheapest first, most expensive first, newest first, oldest first (note: the website had been redesigned since). The first 3 options are clearly transient: you can always put a cheaper, more expensive, or a newer Kitty on the market. Oldest, however, is like diamonds: forever. Thus we decided to buy single-digit Founder Cats, despite their already hefty price tags: somebody just snatched them at 25 ETH and re-listed the lineup at 50 ETH ($25K), with Founder Cat #1 trading even higher at 150 ETH.

On the surface that’s an insane amount of money to make buying and selling cats which do not exist. Spoiler: the story of how the majority of that money was made (a single trade involving an early CryptoKitty) isn’t really all that exciting.

The description of the arbitrage bot which pulled an additional $8k out of the network is a little more interesting, though. That’s possible because of the underlying technology of Cryptokitties; namely: non fungible crypto assets. Cryptocollectables are now a thing. I’m interested to see whether this grows into anything beyond the obvious use case of being linked to real world assets.

Cryptokitties also raise some interesting questions about the value of digital goods. How does a Cryptokitty compare to an Amiibo, for example? Which holds more inherent value? The Amiibo because it’s a physical object you can hold in your hand? Or the CryptoKitty which is digitally linked to you and can be bred to make more kitties?