WARNING: Beware of auctioning loaded coins with Stack's Bowers

[loglow]

Here are two graphs, which I think speak pretty clearly for themselves:





I have several notes:

• The collectible value of physical cryptocurrency is not correlated with its loaded value. These values change independently over time.
• Stack's Bowers current commission structure is plainly unethical, at the expense of sellers, and to the benefit of the auctioneer.
• As the ratio of the coin's loaded value to its collectible value increases, the auctioneer will make a larger share of the profits. This correlation is linear.
• If the ratio is 0 (the coin is unfunded or it has zero face value), the auctioneer will make 16.667% of the profits (aka a 20% commission). This is fair.
• For the vast majority of coins auctioned by Stack's Bowers, this ratio is close to 0. For example, rare dollar coins, ancient coins, etc.
  
• If the ratio is 5, the auctioneer will make 100% of the profits and the seller will receive the coin's face value.
• If the ratio is greater than 5, the coin will not be able to sell at an auction that uses this commission structure.
• By including the coin's loaded value in the auction price, the bidding increment is also artificially inflated, resulting in slightly undervalued sales.
• In the most recent auction, which took place on June 19, 2024, at least 14 sellers sold coins that earned them no profit whatsoever.
• These 14 sellers actually lost money because if they'd peeled and redeemed their coin, they'd still have their unfunded coin.
• Stack's Bowers made a total on $92,920 in profit on the sales of these 14 coins.

This problem is easy to fix:

• Buyers would agree in advance to pay a fee equal to the loaded value of any coin they win on the day of the auction.
• The bidding would start at $0 with no reserve, or at a starting price somewhere below the estimated collectible value of the coin.
• The auction house would make a typical 20% commission on the collectible value of the sold coin.
• Sellers would always receive a fair share of the profits from the sale.
• Any coin could be successfully auctioned, even if the ratio of its loaded value to its collectible value was greater than 5.
• The auction house would make less profit from each loaded coin, but would also be able to sell coins with high loaded values that they otherwise couldn't.
• More sellers would be willing to work with an auction house that adopted these ethical policies.
• Bidders would be mostly unaffected, except that they would benefit from less inflated bid increments.

I've been seriously considering what it would take to start an auction house that used this commission structure.

Here's all of the data in CSV format that was used to generate the graphs above:

Code:

Date,Lot,Firstbits,Slab,Cert,Grade,Sale Price,Hammer Price,Loaded Value,Collectible Value,Seller's Profit,Stack's Bowers' Profit,Source
2022-04-05,3209,1Att3xxP,PCGS,44146109,66,"$78,000","$65,000","$46,000","$32,000","$19,000","$13,000",https://auctions.stacksbowers.com/lots/view/3-VJGGN
2022-04-05,3210,13CEMJaT,PCGS,44146215,63,"$69,000","$57,500","$46,000","$23,000","$11,500","$11,500",https://auctions.stacksbowers.com/lots/view/3-VJGHB
2022-06-15,2308,1B2Q7Cyc,PCGS,44614956,67,"$50,400","$42,000","$21,000","$29,400","$21,000","$8,400",https://auctions.stacksbowers.com/lots/view/3-WWDXU
2022-06-15,2309,1BFbetd6,PCGS,44614948,67,"$52,800","$44,000","$21,000","$31,800","$23,000","$8,800",https://auctions.stacksbowers.com/lots/view/3-WWDY5
2022-06-15,2310,16nHSDxK,PCGS,44614954,66,"$44,400","$37,000","$21,000","$23,400","$16,000","$7,400",https://auctions.stacksbowers.com/lots/view/3-WWDYG
2022-06-15,2311,13iKRGjj,PCGS,44614942,65,"$40,800","$34,000","$21,000","$19,800","$13,000","$6,800",https://auctions.stacksbowers.com/lots/view/3-WWDYR
2022-06-15,2312,155gAYPX,PCGS,44614955,65,"$38,400","$32,000","$21,000","$17,400","$11,000","$6,400",https://auctions.stacksbowers.com/lots/view/3-WWDZ2
2022-06-15,2313,13FvPEep,PCGS,44614949,64,"$38,400","$32,000","$21,000","$17,400","$11,000","$6,400",https://auctions.stacksbowers.com/lots/view/3-WWDZD
2022-06-15,2314,176cKZbo,PCGS,44614947,63,"$36,000","$30,000","$21,000","$15,000","$9,000","$6,000",https://auctions.stacksbowers.com/lots/view/3-WWDZO
2022-06-15,2315,18RTn6hn,PCGS,44614953,63,"$36,000","$30,000","$21,000","$15,000","$9,000","$6,000",https://auctions.stacksbowers.com/lots/view/3-WWDZZ
2022-08-25,7270,18iok44x,PCGS,44614939,67,"$33,600","$28,000","$22,000","$11,600","$6,000","$5,600",https://auctions.stacksbowers.com/lots/view/3-XS9DM
2022-08-25,7271,1BA8Ct1P,PCGS,44614945,67,"$31,200","$26,000","$22,000","$9,200","$4,000","$5,200",https://auctions.stacksbowers.com/lots/view/3-XS9DZ
2022-08-25,7272,19HBVU9K,PCGS,44614941,66,"$31,200","$26,000","$22,000","$9,200","$4,000","$5,200",https://auctions.stacksbowers.com/lots/view/3-XS9ED
2022-08-25,7273,1PHaKVcS,PCGS,44614952,65,"$27,600","$23,000","$22,000","$5,600","$1,000","$4,600",https://auctions.stacksbowers.com/lots/view/3-XS9F7
2022-08-25,7274,14i3bSEg,PCGS,45430789,63,"$26,400","$22,000","$22,000","$4,400",$0,"$4,400",https://auctions.stacksbowers.com/lots/view/3-XS9FL
2022-11-04,10004,157dpvaU,PCGS,44614946,67,"$38,400","$32,000","$21,000","$17,400","$11,000","$6,400",https://auctions.stacksbowers.com/lots/view/3-Z8XSX
2022-11-04,10005,1896nPkp,PCGS,44614951,66,"$31,200","$26,000","$21,000","$10,200","$5,000","$5,200",https://auctions.stacksbowers.com/lots/view/3-Z8XTG
2022-11-04,10006,13tC89uL,PCGS,44614944,66,"$31,200","$26,000","$21,000","$10,200","$5,000","$5,200",https://auctions.stacksbowers.com/lots/view/3-Z8XTQ
2022-11-04,10007,18iGiQi5,PCGS,44614940,66,"$31,200","$26,000","$21,000","$10,200","$5,000","$5,200",https://auctions.stacksbowers.com/lots/view/3-Z8XU1
2022-11-04,10008,1BFsw3pu,PCGS,44614950,66,"$34,800","$29,000","$21,000","$13,800","$8,000","$5,800",https://auctions.stacksbowers.com/lots/view/3-Z8XUC
2023-03-24,8004,13K7EBoF,ANACS,6132851,66,"$57,600","$48,000","$27,000","$30,600","$21,000","$9,600",https://auctions.stacksbowers.com/lots/view/3-11DVUB
2023-03-24,8005,147X1yWH,ANACS,6132495,65,"$48,000","$40,000","$27,000","$21,000","$13,000","$8,000",https://auctions.stacksbowers.com/lots/view/3-11DVUM
2023-06-16,4005,16ppVhXt,ANACS,4748923,67,"$40,800","$34,000","$25,000","$15,800","$9,000","$6,800",https://auctions.stacksbowers.com/lots/view/3-134QI4
2023-11-21,7001,15m2Pnxw,PCGS,45761378,67,"$55,200","$46,000","$36,000","$19,200","$10,000","$9,200",https://auctions.stacksbowers.com/lots/view/3-160685
2023-11-21,7002,131sJqhg,PCGS,47321554,64,"$44,400","$37,000","$36,000","$8,400","$1,000","$7,400",https://auctions.stacksbowers.com/lots/view/3-16068Q
2024-03-28,8003,147Veuat,PCGS,48568588,67,"$96,000","$80,000","$70,000","$26,000","$10,000","$16,000",https://auctions.stacksbowers.com/lots/view/3-18DWU2
2024-03-28,8004,15LiaCSR,PCGS,48931636,66,"$90,000","$75,000","$70,000","$20,000","$5,000","$15,000",https://auctions.stacksbowers.com/lots/view/3-18DWUF
2024-03-28,8005,13VsK17R,ANACS,Unknown,65,"$84,000","$70,000","$70,000","$14,000",$0,"$14,000",https://auctions.stacksbowers.com/lots/view/3-18DWUS
2024-03-28,8006,1Ahz7F6U,ICG,Unknown,65,"$84,000","$70,000","$70,000","$14,000",$0,"$14,000",https://auctions.stacksbowers.com/lots/view/3-18DWV6
2024-06-19,5005,16R8wrCv,ICG,1208350201,68,"$78,000","$65,000","$65,000","$13,000",$0,"$13,000",https://auctions.stacksbowers.com/lots/view/3-1A8OQO
2024-06-19,5006,1P1nsaoV,PCGS,49121934,66,"$78,000","$65,000","$65,000","$13,000",$0,"$13,000",https://auctions.stacksbowers.com/lots/view/3-1A8OQZ
2024-06-19,5007,148Y7D3U,ANACS,6132498,66,Passed,N/A,"$65,000",N/A,N/A,N/A,https://auctions.stacksbowers.com/lots/view/3-1A8ORC
2024-06-19,5008,165yQGSZ,PCGS,49372057,64,Passed,N/A,"$65,000",N/A,N/A,N/A,https://auctions.stacksbowers.com/lots/view/3-1A8ORR
2024-06-19,5009,15kgxa59,PCGS,49372055,61,Passed,N/A,"$65,000",N/A,N/A,N/A,https://auctions.stacksbowers.com/lots/view/3-1A8OSL

[owlcatz]

Honestly all I see here is that you are a newbie who doesn't understand this market at all, especially right now.  

However, you have some skills at creating charts with power BI or Excel or whatever it was... lol...👍

I think your intention is good, but do let us know how your auction house site works out.

[loglow]

Honestly all I see here is that you are a newbie who doesn't understand this market at all, especially right now.

If that's the case, then please help me understand it.

[owlcatz]

Honestly all I see here is that you are a newbie who doesn't understand this market at all, especially right now.

If that's the case, then please help me understand it.

Look up minerjones auctions and running comparison of from data on this forum.

Edit. The simple answer is, premiums go down as Bitcoin price goes up.

Edit number two. If you had a loaded cas coin, would you make more dollars selling it here or there at this time?

Honest question, thanks!

[loglow]

The simple answer is, premiums go down as Bitcoin price goes up.

If you mean by percentage of loaded value, then yes, of course they do.

If you mean by absolute value, then I don't see it. It looks like valuations have remained reasonably stable over the last three years at minimum.

Please feel free to point me to market data that indicates otherwise.

[loglow]

If you had a loaded cas coin, would you make more dollars selling it here or there at this time?

Honest question, thanks!

Assuming it's a 1BTC coin, you'd make an ton more selling it here, since unless it has a premium over $12,000 (one-fifth of its loaded value), you'll make $0 selling it with Stack's Bowers. They'll make a lot of money though.

Even if your coin had a premium of $30,000, you'd split that premium with Stack's Bowers 50-50.

[owlcatz]

If you had a loaded cas coin, would you make more dollars selling it here or there at this time?

Honest question, thanks!

Assuming it's a 1BTC coin, you'd make an ton more selling it here, since unless it has a premium over $12,000 (one-fifth of its loaded value), you'll make $0 selling it with Stack's Bowers. They'll make a lot of money though.

Even if your coin had a premium of $30,000, you'd split that premium with Stack's Bowers 50-50.

So at what point do you peel versus having to pay an escrow and or take a flight because it's too expensive to insure?

[SurfinPanda]

I agree with a lot of what OP is saying here.

Watching the most recent SB auction - most of the loaded Cas coins sold for face value (plus the 20% buyers fee SB I assume pockets).

This is unfortunate for the sellers who basically made no profit at all. I don’t fully agree with OP though in that SB is not going to take on the risk of selling a loaded coin which is worth 75k and only make 20% of the profit above the spot price of BTC as it wouldn’t be worth it to them - there is likely some middle ground.

I know that large recent sale of Cas coins on Heritage I think the buyers premium was split between the auction house and the seller - that seemed like a fairer deal.

What will happen if this continues and the fees don’t change is people will simply stop selling their loaded Cas coins on SB as they will not expect to make any profit at all as buyers aren’t willing to pay more than a 20% premium over spot price at this time it seems.

SP

[loglow]

Watching the most recent SB auction - most of the loaded Cas coins sold for face value (plus the 20% buyers fee SB I assume pockets).

Yes, SB keeps this commission ("buyer's premium").

This is unfortunate for the sellers who basically made no profit at all. I don’t fully agree with OP though in that SB is not going to take on the risk of selling a loaded coin which is worth 75k and only make 20% of the profit above the spot price of BTC as it wouldn’t be worth it to them - there is likely some middle ground.

I know that large recent sale of Cas coins on Heritage I think the buyers premium was split between the auction house and the seller - that seemed like a fairer deal.

I agree with you that a middle ground could work, especially considering all the insurance, storage, overhead, etc. that comes with safely auctioning high-value items.

• As it stands, SB made $107,959 from all the loaded coins in their recent auction; sellers made $19,915.
• If commissions had been split 50-50, SB would've made $53,980; sellers $73,895.
• If commissions had only been taken on the collectible values, SB would've made $21,312; sellers $106,562.

I could probably get behind a middle ground that looks like that. If either party makes a profit, all parties should.

In fact, a seller not making any money or in fact losing money on an auction in which the auctioneer makes so much might even be construed as breach of fiduciary duty in some jurisdictions. Auctioneers are legally considered to be agents of the seller, after all.

What will happen if this continues and the fees don’t change is people will simply stop selling their loaded Cas coins on SB as they will not expect to make any profit at all as buyers aren’t willing to pay more than a 20% premium over spot price at this time it seems.

The collectible value certainly looks more or less decoupled to me, so I wouldn't expect to see vastly higher premiums from collectors. I mostly agree with you, except for one detail: If this continues, premiums hold steady, but crypto prices rise by as little as 10-20%, people simply won't be able to sell Cas coins with SB anymore, as their commission structure would make it impossible. Same goes for Heritage, since their BP is the same (20%) even if they share it differently.

[loglow]

So at what point do you peel versus having to pay an escrow and or take a flight because it's too expensive to insure?

The value of a peeled Cas coin looks to be about $200-$800 depending on the year.

[blucepheus]

So at what point do you peel versus having to pay an escrow and or take a flight because it's too expensive to insure?

The value of a peeled Cas coin looks to be about $200-$800 depending on the year.

It also depends on the denomination, condition, graded/ungraded, holo still attached, etc. Graded, peeled gold 25s with holos, for example, have sold for several thousand $.

[rsincognito]

I consider this post a big "nothing burger" (respectfully) I have been in the auction biz for over 25 years. and the physical btc collectibles for several. stacks is doing everything right, they only suggestion I made to James was making the bid increments $500 instead of $2,500 on high end loaded coins, $2,500 increments are just to hight to create bidding competition. also I think stacks should cut into their commission a little bit to help sellers get their high end loaded coins sold, if a $80k loaded 2011 Cas coin gets to with in a couple grand $of spot price,  I feel that stacks should cut into their commission and make up the difference to help get the coin sold, then both the seller and stacks make money. think about how long the seller goes without their coin just to have it passed on because stacks isn't willing to bend a little bit.  that's my 2 cents

[minerjones]

Any commission taken by SB should only be on the premium, not the loaded value.
This is how Scarce does it

[rsincognito]

Any commission taken by SB should only be on the premium, not the loaded value.
This is how Scarce does it

I can respect that suggestion, it does make a lot of sense. That would be a nice update to auction Conditions that I would vote yes for MJ.

[DaveF]

<shrug>
It's the cost of having someone else do it vs the cost of doing it yourself.

Don't go to Honda to change your oil for $79.99 you can get the oil and do it yourself for under $40.

Take you coin, ship it to the auction house, wait for money.
vs
Take pictures, post here, wait for it to sell, ship it, hope it gets there with no issues.

Not saying one is better then the other or one is wrong vs the other.

Real life example:

I could have sold my last motorcycle on the private market and probably gotten an extra $750 to $1000.
Would have take a couple of weeks and hours and hours of my time.

Left home 9 AM on Saturday, dropped it off at the dealer, got a check (that I knew was good since it was from a dealer vs private) and has the check in the bank and was back home before 10AM
Didn't clean it, didn't change the oil, almost didn't make it there since it had so little gas in the tank.

Now if I can only find someone to take the Ryker I would be good.

-Dave

[Spokanistan51]

The more auctions Stacks has, the lower the premiums as time goes on. This goes for other auction houses that have sold physical crypto also. Close to nothing currently on premiums the seller walks away with equivalent, or close to, load amount after auction fees. In discussing sales with Stacks, it sounds like most of the big buyers are non-crypto collectors that want exposure to some pieces for their non-crypto collections. The recent Heritage Auction with Otoh's large Cas offering, in my opinion, flooded the market with higher graded Cas's. Nothing against Otoh, great return and happy for him! The sale of his large collection just impacted the premiums, period. This in turn drove the demand and premiums down going forward. The non-crypto collectors now have a few pieces, so they are solid and are not looking any longer. No need to pay high premiums for a decent grade loaded Brass Cas, when you to snagged some of Otoh's or current auctions at close to load amount (hammer fees not considered). I don't think we will ever see the premiums the initial Stacks auctions brought until adoption and exposure increases substantially. This may not happen until BTC gets to 100k, who knows.

[bitbollo]

Looking the data ... there is a small amount of samples, only 31 that I guess isn't enough for taking any assumption generally...
Moreover there are some "general circumstances" that must be taken into account, basically bitcoin value (1 btc = 20K USD is pretty different from 1 btc = 65K USD) even bear/bull periods and so on...

This can be part of the nature of the auctions can also go negatively compared to what was expected.
If you want to get the most out of your coin, put it at a fixed price that you want to realize.
If you want to sell it professionally, obtaining maximum visibility, and quickly... use an auction house!

Lastly regarding commission, the auction house has "fixed" costs (advertising, materials, site management, etc). It's obvious that they also have to make a profit...

[OgNasty]

Obviously people are better off if they’re able to sell without using an auction house. Stack’s Bowers takes a huge commission and sellers aren’t really protected from low sales. I think you’d be hard pressed to find someone who chose to sell via an auction house and doesn’t regret it. People sell via auction houses because it’s easier and less risky, not because it’s more profitable. More hands in the pot = less profit for everyone. It isn’t rocket science.

[CARIBBEAN_TREASURES]

Yeah, most people want 1.1 - 1.3x for their high denomination btc piece. If they can't get it, we might start to see a decline in Casascius pieces on Stacks.

[loglow]

I consider this post a big "nothing burger" (respectfully) I have been in the auction biz for over 25 years. and the physical btc collectibles for several. stacks is doing everything right, they only suggestion I made to James was making the bid increments $500 instead of $2,500 on high end loaded coins, $2,500 increments are just to hight to create bidding competition. also I think stacks should cut into their commission a little bit to help sellers get their high end loaded coins sold, if a $80k loaded 2011 Cas coin gets to with in a couple grand $of spot price,  I feel that stacks should cut into their commission and make up the difference to help get the coin sold, then both the seller and stacks make money. think about how long the seller goes without their coin just to have it passed on because stacks isn't willing to bend a little bit.  that's my 2 cents

It sounds like we agree on the most important points (bid increments are inflated, everyone should benefit, etc.)

I bet a fair number of people who own crypto coins don't have any auction industry experience, and that's why I wanted to put up a warning.

Heritage is offering somewhat better terms, but still with some pitfalls. They'll split 50-50 the portion of the BP that exceeds the spot price, and they don't use any reserve. This means that, unlike SB, all coins will sell. However, the seller will lose money when the spot:premium ratio goes over 8 (ie. if BTC is at $60,000, a 1BTC coin with anything less than a $7,500 premium will lose money for the seller). Heritage will always earn 50% of the coin's premium unless the spot:premium ratio is under 5, in which case the seller will earn a higher percentage.

Interestingly, this works out to be about a 9% commission for unfunded coins, which is a lot less than 20%. However, I don't know if they offer these terms for auctions of peeled coins, or for coins loaded with only very small amounts. If they do, that could be a pretty good option.