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NBA Top Shot, NFL All Day and the brand new NFT reality: What’s next as market falls?

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Digital collectibles and assets — cryptocurrencies, non-fungible tokes, exchanges, etc. — have been within the headlines for months and mostly for bad news.

And it’s not been getting any higher, particularly within the wake of crypto exchange FTX, which spent lavishly on sports marketing deals, collapsing entirely and so-called currencies resembling Bitcoin tumbling in value.

NFTs, specifically, were a sports industry darling in 2021 when Vancouver-based Dapper Labs saw its licensed NBA Top Shot digital video highlight collectibles explode in popularity with tons of of tens of millions of dollars in retail and resale volume.

Despite critics warning that many NFT projects are environmentally damaging, could be akin to Ponzi schemes, are dangerous assets because of untamed price volatility and lack of regulation, and sometimes feature assets freely available on YouTube and elsewhere, fans and speculators still bought in.

Early buyers made profits. The big wave of latecomers mostly didn’t. Briefly, lots of people got burned, even when whatever they bought or invested in wasn’t an outright swindle.

Others have been completely happy to only be collectors while some buyers still seek to make profits in a radically slimmed-down market.

A 12 months after NBA Top Shot emerged because the wildly popular poster child for sports NFTs, the cracks were clearly visible within the paint despite ongoing optimism about digital assets overall. Two years later, they’re chasms.

Dapper Labs says it’s profitable and doing OK amid the market declines, and continues to churn out its NBA and NFL projects under multi-year licensing deals, together with projects with other sports leagues and organizations resembling UFC and Spanish soccer’s top-flight La Liga.

Each of those U.S. major leagues proceed to be Dapper Labs partners. The NFL, whose NFL All Day product debuted in September, declined to comment on its relationship with the corporate and the broader NFT collapse, while the NBA provided only an emailed statement: “NBA Top Shot continues to be a key partner and a valued component of our business. Providing the NBA Top Shot community with much more ways to attach with the league will proceed to stay a top priority.”

The tech sector has been slammed with job cuts in recent months, and Dapper Labs hasn’t been immune. Founder and CEO Roham Gharegozlou on Nov. 2 announced his company was reorganizing and cutting 22 percent of its roughly 600-person workforce due to “macroeconomic environment” and too-quick company growth.

“We streamlined operations and are well-capitalized to support our team, communities and core products, irrespective of the economic conditions over the following few years,” said Adam Barrick, vice chairman of sports partnerships at Dapper Labs in an email. “As an organization, we’re well-positioned for the longer term, with a powerful balance sheet, multi-year partnerships with a number of the most enduring brands on this planet, and business lines which can be so early of their story, we imagine they’ve 100x upside.”

Dapper, which is working to make itself a mobile-first platform, continues to insist its digital products are, firstly, collectibles, positioning them as serialized digital trading cards with various levels of artificial scarcity — one other strategy borrowed from traditional card makers.

The corporate provides a secondary market exchange for fans to purchase and sell their NFTs, and that’s where the overwhelming majority of Dapper Labs products change hands and where essentially the most revenue is generated — and don’t forget, the sports leagues and unions get a cut of all those sales.

“We construct digital collectibles to offer fans with long-term value — they are usually not, nor have they ever been, an investment product,” Barrick said. “Which means transaction volume isn’t a metric that tells the complete story of the product or shows why it’s successful with collectors.”

The corporate notes that its NFTs can have physical perks attached to them, resembling meeting the athletes in person, tickets to special games, and rewards for keeping slightly than selling “moments” — Dapper’s term for its video NFT highlights. It also gamifies NFTs to fuel traditional collecting — but all of that also requires consumer spending.

Giving NFTs value beyond being an investment is an element of a technique to take care of not only price volatility and large downward trends within the digital asset markets, but in addition exterior trends that affect consumer spending resembling inflation and energy prices.

“We’re mindful of market impacts and the way macroeconomic headwinds have impacted the world, so we’re doubling down on areas where we will provide essentially the most value back to our communities,” Barrick said. “With our sports products, this includes leaning into the online advantages our products bring to the general fan experience.”

Whether Dapper Labs means their NFTs to be investments or not, that’s what drove a sizeable chunk of the 2021 boom, which could also be more properly termed a bubble that has lost much of its (hot) air.

Because NFTs are created using blockchain technology that’s publicly transparent, sales volume is comparatively easy to trace, and the Dapper Labs transaction trends are stark.

NBA Top Shot, minted on the Flow blockchain that’s said to be less of an energy hog, has done just over $1 billion in all-time sales — totally on the secondary market — since its debut in private beta testing in 2020. That’s the seventh-most of any collectible NFT tracked by cryptoslam.io.

NBA Top Shot’s peak was February-March 2021 when combined sales topped $432 million — numbers that earned lots of media and public attention, and helped fuel the broader NFT boom in sports, arts and other sectors.

That was obviously an unsustainable volume, which the corporate acknowledged on the time.

Since those heady months of early 2021, Dapper Labs’ NBA product has declined, falling to $82 million in April 2021 sales and steadily since with a number of months of increases. Sales volume was just below $2.2 million in December.

The common sale price of an NBA Top Shot highlight peaked at $181.81 in March 2021. Last month, the common had fallen to $12.83 — the bottom average price for the reason that product began being privately minted and recorded by cryptoslam.io in July 2020.

Dapper Labs said its products proceed to sell out, and there still are buyers purchasing its basketball and football NFTs for 1000’s or tens of 1000’s of dollars, including a LeBron James “Cosmic” Series 1 highlight for $25,000 on Dec. 24 and three Luka Dončić “Holo MMXX” highlights that sold for $10,000 and $11,000 on Recent Yr’s Eve.

GO DEEPER

‘NFL All Day’ is here: Can the NFL’s version of NBA Top Shot work amid an NFT downturn?

The professional football NFTs haven’t fared significantly better, even when the declines aren’t as enormous due to their late entrance right into a shrinking marketplace.

The NFL All Day NFTs did $7.3 million in sales for his or her mid-August debut after which $14.2 million in September when the league’s regular season began — like cardboard trading cards, seasonality affects sales. Every month since has seen an NFL All Day sales decline, from $6.4 million in October to $2 million in December.

NFL All Day all-time sales are at $68 million, of which $34 million got here from sales while the product was still in private beta testing from February to July 2022, per cryptoslam.io data tracking.

The variety of unique buyers for NFL All Day highlights — Kansas City Chiefs quarterback Patrick Mahomes is the marketing face of the product — peaked at greater than 23,000 making nearly 460,000 transactions in September and has since steadily dropped to 7,300 buying or selling 99,000 highlights in December. Average transaction price in August was $42 and that fell to just below $21 in December.

The corporate said an Odell Beckham “Legendary Moment” sold for $50,000 in September.

The most important NFL All Day sales day was Nov. 18 when just below $1.4 million value of highlights modified hands — in other words, a fraction of the NBA volume when the NFT hype was at its hypiest.

A Dapper Labs spokesperson noted that the corporate put out 2,000 NFT packs — the video highlights are packaged like a digital foil trading card pack in your screen — that included the late Franco Harris’ iconic “Immaculate Reception” from 50 years ago, they usually sold out in lower than 4 hours on Dec. 20. A pair were resold for as much as $9,000 at the tip of the month.

The variety of highlight packs and their retail pricing are also aspects that drive Dapper Labs’ overall volumes amid the broader market demands.

While the broader digital asset market has declined significantly — Bitcoin is at about $16,800 now, down from its high of nearly $70,000 in November 2021 — Dapper Labs is alleged to be profitable and finding out what the longer term pace of NFT sales will settle into.

Gharegozlou, the Dapper Labs founder and CEO who wasn’t made available for this story, told The Athletic in February 2021 that the corporate was already profitable.

Barrick reiterated that in his recent emailed statement, and in addition said the corporate isn’t financially affected by the FTX situation (which now includes bankruptcy and lawsuits and its founder and executives jailed). Dapper Labs has no exposure to FTX, the related Alameda Research crypto trading company SOL, or other affected tokens, Barrick wrote, and 95 percent of the corporate’s balance sheet is in U.S. and Canadian dollars slightly than in crypto.

Because Dapper Labs is a non-public company, it’s impossible to independently confirm the financials.

Along with NFT sales, the corporate has raised greater than $600 million in outside funding rounds from major funds and in addition sports stars and celebrities resembling Kevin Durant, Klay Thompson, Michael Jordan, Andre Iguodala, Kyle Lowry, Spencer Dinwiddie, Stefon Diggs, DK Metcalf, Will Smith, 2 Chainz, and Sacramento Kings owner Vivek Ranadive.

“We’re well capitalized, with a powerful balance sheet, multiple years of runway and no outstanding debt. We now have no need for added fundraising, and we proceed to take a position in each of our products,” Barrick said.

Still, the digital asset industry’s woes have spooked sports teams, leagues, and athletes — who possibly shouldn’t have been involved with a questionable nascent technologies — into ending deals, including the Miami Heat dropping FTX as its arena sponsor.

go-deeper lazyload

GO DEEPER

State of the sports card boom: After sky-high surge, is market still healthy?

In a shocker this week, Fanatics Inc. billionaire owner and sports entrepreneur Michael Rubin reportedly is selling his 60-percent controlling equity stake in NFT maker Candy Digital, which has an MLB licensing deal, to a crypto banker.

“Over the past 12 months, it has grow to be clear that NFTs are unlikely to be sustainable or profitable as a standalone business,” CNBC reported Rubin as telling employees in an email. “Apart from physical collectibles (trading cards) driving 99 percent of the business, we imagine digital products may have more value and utility when connected to physical collectibles to create the perfect experience for collectors.”

Fanatics bought venerable trading card giant Topps Inc. a 12 months ago, inheriting its small NFT arm that competes with Candy Digital and Dapper Labs.

What’s happened with Dapper Labs is an element of a wider NFT industry trend. A report from Nonfungible.com that tracks the NFT industry wasn’t exactly brimming with positive results in regards to the pace of sales — the third quarter of last 12 months saw $450 million in NFT sale losses, the primary time any quarter has had a financial loss, the positioning reported.

So how did we get here?

Financial advisor Jamie Catherwood, who makes a speciality of the study of historic asset bubbles and finance history, said NFTs collapsed since it got harder for casual buyers to search out profits.

“By and enormous, I feel it’s a function of it’s challenging to generate profits anymore,” he said. “(At the start,) you can buy anything (digital) together with your eyes closed, and most of the time you can sell it and generate profits.”

Like some experts and laymen watching NFTs erupt two years ago, he was skeptical the boom would last, but he also said a more sustainable NFT market of some sort will endure after the initial hysteria passes. What that appears like is removed from known today and would require tinkering and development to search out the bedrock advantages to retail non-fungible tokens.

“It was just so ridiculous at its height in 2021,” Catherwood said. “I feel there remains to be something there that shall be the second wave. I feel there shall be some core features that shall be around for some time.”

Catherwood doesn’t think collectible NFTs, even with a wave of presidency regulations, will return to their 2021 sales volumes, although he expects additional consumer protections to herald fresh institutional investment that gives credibility.

“It’s hard for me to check a catalyst for what rebounds the market to something like what it was at its height,” he said.

An organization like Dapper Labs may proceed to motor along making nice profits for a very long time without running afoul of regulators or the broader public, counting on collectors slightly than speculators but without the large sales volumes of two years ago.

The court of public opinion also will proceed to play a serious role in the longer term of NFTs and digital assets. While what’s occurred with FTX and other corporations is separate from Dapper Labs, the general public often lumps digital technology firms (especially when equally complex) right into a single problematic category that’s hard for individual players to emerge unscathed.

“The hype is down; everyone knows that,” said Merav Ozair, a fintech professor and consultant who’s a go-to expert on crypto and blockchain technology. “The issue with this space is one bad things happens, it poisons the basket. People put all of them together. People don’t know differentiate.”

That’s frustrating and requires education to assist the general public overcome any trepidation, particularly when a serious company collapses Enron-style and fuels a typhoon of bad headlines.

Government regulation of the digital assets industry, particularly cryptocurrencies and exchanges, also shall be a serious step towards regaining public confidence.

“Regulation is coming, and that’s an excellent thing,” Ozair said. “That can put things into perspective and produce more confidence available in the market. It should usher in more traditional investors. That’s an excellent thing that can come out of this.”

(Photo: Ric Tapia / Icon Sportswire via Getty Images)

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