A curious price inversion has occurred in IPv4 markets. The long-term trend that discounted large blocks has reversed.

The graph below identifies /15 and /16 (large) block pricing per IP address throughout the period in the form of dark spots. It is evident that, for most of the timeframe here (2014 to the first half of 2021), large blocks sold at a significant discount.

One might guess that the administrative chores related to large-network needs were most efficiently and cheaply satisfied with large blocks. This would, of course, increase their value. But, perhaps, this influence on pricing was overcome by the relatively high absolute cost of a large block and/or the scarcity of buyers for them. What’s more, simple price-sensitivity may have been more acute for larger purchases. Causation is tricky, here.

It is also possible that the demand for small blocks exceeded their supply, driving prices up. At least relative to the supply-demand relationship of larger blocks. Regardless of the various influences on large block prices, they remained relatively low (cheaper) throughout this period.

However, the discount for these large blocks created an unusual opportunity in a commodities market like IPv4. A large bundle of addresses was cheaper per IP address than if the block was subdivided. During 2020-2021 larger sellers and savvy traders in these assets began to break them up and sell the addresses in smaller, more costly-per-IP batches. This tactic increased the value of a large block when sub-divided.

The lower per IP price of large-block IPv4 addresses ended during 2021 as IPv4 prices began to trade in wider ranges. As that happened, the relationship between large and small block prices changed in many ways. Large blocks became (relatively) more costly than smaller ones but continue to trade in a relatively tight range. Smaller blocks began to be traded in a wider—and generally lower—range.

IPv4 Block Price Inversion

Today, sellers can expect a higher price-per-address for larger blocks. As noted, the cause of this inversion from recent history can’t be fully known. But it makes sense in terms of scarcity: we know there are more /18s than /16s. Prosperous, aggressive operations in online retail, communications and cloud-based services are growing rapidly and profitably. As a result, the urgency to accumulate IP addresses is acute, and their value to operations very high.

Theoretically, a buyer could piece together smaller blocks and resell them as a newly-formed bigger blocks (/16 or more) for a bit of profit. However, locating and combining consecutive small blocks is very difficult.

It’s impossible to know if this inversion will continue, flatten or reverse. What’s more, the relative impacts of a slowing world economy and recession concerns have surely influenced near-term network development. The relative impact the economy and economic expectations may be having on the relative pricing of small, medium and large buyers remains unclear. As a result, the market situation is a curious one—and certainly unpredictable.

For a more thorough account of IPv4.Global’s pricing observations and conclusions, read them in their blog on IPv4.Global.