For Digital Fashion, Does FTX’s Demise Actually Matter?
The spectacular rise of digital currency exchange FTX and its arguably even more spectacular fall are poised to enter the annals of tech lore. As a case study in hubris, if not outright criminality, the story has generated attention everywhere from niche blockchain blogs to mainstream media publications, with critics pondering whether FTX founder Sam Bankman-Fried’s fate will hammer the final nail into crypto’s coffin once and for all.
Not so fast, say a still-booming breed of related artists and business executives who rely on digital currency. There’s a foundation of entrepreneurs, creatives and established brands that remain invested in the emerging tech and the applications and experiences it unlocks. For them, the FTX debacle appears to have little implication on things like fashion NFTs, Web 3.0 projects and metaverse shopping initiatives, at least so far.
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“We’re keeping an eye on where the winds are blowing, but no, we don’t have plans to shift priorities at this point,” one apparel company insider told WWD on condition of anonymity, as the person was not authorized to discuss the matter. “Digital fashion’s going to happen, is happening already. There’s still a ton to figure out — for everyone in the industry, not just us. But the genie’s out of the bottle and you can’t stuff it back in there. Who’d want to?”
Others expressed similar sentiments to WWD for a variety of reasons. Some brands, after highly publicizing their entry into Web 3.0, don’t relish having egg on their faces. There’s also a general sense that a number of executives genuinely don’t know what to make of the situation yet, and they don’t want to act rashly. Digital fashion, metaverse shopping and non-fungible tokens, or so-called “phygital” retail, are poised to become big business in the future and no one wants to miss out, thus leading to a broad “wait and see” approach.
Of course, a reality check may be coming for at least some crypto evangelists, regardless.
Earlier NFT projects such as celebrity-fueled Bored Ape Yacht Club paved the way for start-ups like virtual product and experience innovator RTFKT, now part of Nike, as well as luxury houses like Dolce & Gabbana to pull in the equivalent of millions of dollars with virtual/physical collections, whetting the appetites of high-risk investors, decentralized autonomous organizations or DAOs, and others. While a steady flow of similar gonzo transactions was always unsustainable — because common sense — the collapse of FTX makes it even harder to picture now.
Perhaps it’s because of how far the company has fallen.
Celebrity endorsements from Tom Brady, Steph Curry, Shaquille O’Neal, Larry David, Kevin O’Leary and many more, plus a string of high-profile acquisitions, gave the young crypto exchange a magical, fairytale quality befitting a unicorn. At this point last year, FTX, then just two years old, raised an eye-watering $400 million in funding, taking its total raised to $2 billion and its valuation to $32 billion. Its successes seemed to prove crypto’s legitimacy and viability, and the 30-year-old Bankman-Fried was portrayed as a visionary deserving of the $26.5 billion net worth he amassed at his peak.
A year later, the unicorn looks more like a donkey. A series of revelations late last year depicted sketchy maneuvers between FTX and Alameda Research, Bankman-Fried’s slightly older crypto hedge fund. Alameda Research held a massive stake in FTT, the digital currency created by FTX. But FTX also used it as collateral on its balance sheet, adding to a confusing situation that even well-honed finance experts found opaque and hard to follow. That’s never a good thing, but for a blockchain-based operation, it seemed particularly egregious. (With blockchain, computers share a decentralized ledger that’s capable of tracking digital assets. In other words, transparency is supposed to be a crucial point.)
Although Bankman-Fried filed for bankruptcy protections, he couldn’t safeguard himself from investigations by the Securities and Exchange Commission and the Department of Justice. The authorities aimed to untangle how funds moved between the two businesses, among other things, and the long-simmering financial scandal hit peak boil in December with the arrest of the young tech founder.
It is a mess of rare magnitude, that much is clear. But what’s less certain is whether it’s enough to shake the faith in crypto, blockchain, NFTs and the like, particularly now, as their mainstream potential is beginning to mature. Because so far, most of the hand-wringing appears to come from the pundits, not the fashion, tech or other pioneers blazing the virtual trail.
Call it a collective shrug, but these innovators seem undeterred, and the key to understanding that impervious optimism is actually quite simple: They were already accustomed to crypto’s intense swings. They know that the volatility preceded Bankman-Fried and that the roller-coaster ride will likely continue, regardless of what happens to him.
Pros like Femi Oluwafemi, the FaZe Clan veteran who now runs Web 3.0 creative content firm Fourth Frame Studios, are keeping their eyes on the vast potential of blockchain. “There’s huge value in the NFT space and applications,” he told WWD. “There are some brands that are starting to do some cool things within the digital [and gaming] world, such as Balenciaga. I think that there’s an appetite, and an audience for it.”
In other words, there’s no shortage of desire on the part of brands to pursue the metaverse and Web 3.0. What they lack is the know-how, but they’re figuring it out. “I think we’re still in the discovery phase,” he told WWD. “But I do think it’s going to survive. There are utility applications that are yet to be discovered and some really cool brands are entering the space.”
For Oluwafemi, who’s worked with a notable roster of brands, including Ralph Lauren, L’Oréal, Walmart, Roblox and Beats by Dre, among many others — including his previous employer, FaZe Clan — the metaverse is still a very young concept. That’s exciting because it means that there’s a lot of room for new ideas, and those discoveries could change the game.
“It’s like the very early stages of the internet,” he explained. “People jumped in really quick, [even though] they didn’t really quite know what it was. There was a down climb. There was a bubble. And then all of a sudden, it started to pick back up again.
“So where we’re at, in the lifespan of this entire space, I’m not sure. But I see that it does have longevity and there’s a future in it.”
Big tech seems to agree, even as it faces economic headwinds and regulatory battles.
Meta’s race to the metaverse has turned Instagram into an NFT-minting machine. Meanwhile, Apple’s mixed reality headset looks on track for a late 2023 release. Retail platforms like Shopify are still figuring out their place in the virtual world, but they’re making progress. Last summer, the company announced that it would offer NFT support, and on Thursday, a new Shopify app from Venly appears to pay that off by allowing merchants to design, mint and sell their own Avalanche NFTs in just a few clicks.
A series of notable offerings also signal a rising tide of intriguing new projects and businesses — from the Council of Fashion Designers’ inaugural NFTs and metaverse exhibition to a new fashion brand by crypto legend Gmoney and the launch of Mntge, Sean Wotherspoon and Nick Adler’s NFT platform for premium vintage apparel. Decentraland also announced it will host a second edition of Metaverse Fashion Week March 28 to 31, following last year’s inaugural event which attracted Tommy Hilfiger, Etro and Guo Pei, among other brands.
It’s tempting to believe that they’re ignoring the state of crypto, averting their eyes from the writing on the digital wall. That’s not necessarily accurate, though. They do see what’s going on. They just don’t view it as bad news.
“There are builders in the space right now and profiteers, and that is what’s making it really healthy, actually,” explained Mntge’s Adler. “I think it’s made it really nice and organic for our growth. That’s the positive outlook we have on it: It’s a time for real builders to be in here and for all kinds of profiteers [to get] the ‘rug pull’ stuff and just kind of wash away, because that opportunity is not here for them anymore.
“So I think it’s actually cleaning up the market beautifully.”
