Millions for Pokémon cards: collectibles boom or bubble?

The surge in collectibles has been a topic of discussion for some time, but even longtime observers are finding certain figures increasingly hard to overlook.

Last year the question was raised of whether the boom in Pokémon cards, sports cards and similar items was just another passing trend or the early stages of a new investable asset class. Earlier this year, that conversation was revisited as capital appeared to flow more frequently between cryptocurrencies and collectibles.

Fast-forward a few months, and the market has taken another significant stride forward.

A 2005 Rayquaza Gold Star graded CGC Pristine 10 fetched $1.02 million through Fanatics Collect in August. At the time, it became the first English-language Pokémon card to break the $1 million barrier.

A few weeks later came an even larger sum.

A Torchic Gold Star graded PSA 10 from 2004's EX Team Rocket Returns set changed hands for $2.7 million via Alt, setting another English-language Pokémon card record.

This is where the discussion starts to become more compelling.

The conversation is no longer limited to people spending a few thousand dollars on nostalgia. At these eye-watering prices, collectibles are vying for the same capital pools that might otherwise go into stocks, crypto, watches, art or other alternative assets.

Today, an investment infrastructure is gradually taking shape around the hobby. Grading companies provide authentication and condition benchmarks, major auction platforms improve price discovery, and vaulting services along with online marketplaces make it easier for high-value collectibles to change hands without owners physically transporting millions of dollars worth of cardboard.

That said, there is an uncomfortable question about whether parts of the high-end collectibles market could be used for money laundering, given their portability and occasionally subjective valuations. That topic deserves its own separate discussion, but for now the focus is on what rising genuine investor demand says about collectibles as an emerging asset class.

None of that automatically means the prices being seen actually make sense.

The Rayquaza Gold Star is a case in point. Its CGC Pristine 10 grade is unique in the company's population report, being the only example to receive that grade, while a PSA 10 copy, for instance, sold for $682,500 in July.

That arguably represents a huge premium for scarcity at the very top end of the market. But of course, one must consider how the card's perceived value has shifted over the past three months, and things do move very quickly in the collectibles market.

In stocks, debates center on earnings, cash flows and valuation multiples. With collectibles, the value ultimately comes down to what the next collector is willing to pay for rarity, condition, provenance and desirability.

When demand is booming, that can generate extraordinary returns. But when liquidity dries up, price discovery can become considerably more uncomfortable.

So is this all a bubble?

Parts of it definitely draw some parallels to one. Record prices attract attention, attention draws new buyers, and new buyers push prices ever higher. That script has played out many times in traditional markets before.

That said, there is growing skepticism that collectibles on their own merit are merely a passing fad.

The more interesting development is that the market is becoming more financialised by the day. Collectibles are increasingly turning into an alternative store of value for certain investors, sitting alongside niche markets like art, watches, vintage cars and even crypto.

That does not make the $2.7 million card sale cheap. However, it does suggest the bigger question is changing.

The question may no longer be whether collectibles can become an investment market. Instead, we might already be starting to see what that market looks like when real money arrives.