Lessons from Dapper Labs’ NBA and NFL NFT Collectibles Projects — CoinDesk

The first days of the COVID-19 pandemic showed us human nature in a largely new context. People all over the world were locked down and separated, but at the same time newly connected via the internet and social media.

For many, it turns out, it was a formula for serious mental health challenges. But others channeled their raging cabin fever into a milder form of madness: financial speculation. From WallStreetBets to Davey Day Trader, 2020 and 2021 saw a manic rush of participants into speculative markets, which led to a huge rally in Peloton shares and bitcoin – but also Cabbage Patch Kids, action figures and sports cards.

Some of that collective interest spilled over into a whole new category: non-fungible tokens (NFT). Bored Apes and similar compilations garnered most of the fascination (and outrage) from mainstream audiences. NBA Top Shot, Dapper Labs’ line of officially licensed digital collectibles featuring big moments in hoops, also saw a rush of interest, with sales volumes skyrocketing in early 2021.

Then, as in other pandemic bubbles, came the crash. Top Shot volumes and prices dropped dramatically starting in April 2021, leaving many collectors unhappy. A follow up collection from Dapper Labs called NFL [National Football League] All Day was launched in August 2022, but did not generate the same hype as Top Shot had. It’s a dynamic that has repeated itself across asset classes as a two-year pandemic feast turned into a vicious hangover of systemic collapses and stunted growth.

But NFTs, and sports collectibles more generally, aren’t going anywhere. Even today, Top Shot volumes are about 10 times higher than when the series was launched. If it’s not time to pack it up and go home, what can we learn from the glittering rise and exuberant descent of Dapper’s digital collectibles?

What made the difference between Top Shot’s spectacular success and All Day’s more muted reception? And is a Top Shot-style run-up something the creators of digital collectibles should even want to emulate?

In search of insight, we went to the people who really know: the collectors themselves.

Ahmad Ghahary was never a big collector of sports memorabilia, but he has been a huge sports fan and die-hard fantasy sports player since the 1990s. – I like the season [fantasy leagues],” he says, “[And] I started playing multiple goalie leagues, multi-year legacy teams. So I started to figure out what prospects would be good for hockey.” Ahmad is Canadian, so hockey came naturally.

He also became a bigger fan of the National Basketball Association by December 2020, when he says he finally learned about the boom in sports fundraising thanks to a CNBC report. Ghahary thought he could use his sports acumen to capitalize on the trend.

But a funny thing happened on the way to the wax package.

“When I googled ‘sports card collection,’ [NBA] Top Shot was the first on top. I started googling NFTs, but there was next to nothing on YouTube. I thought, maybe there’s an opportunity here to get in early.” TopShot sales had opened in public beta in early October 2020.

A pharmacist by day, Ghahary is a self-proclaimed tech novice. But it didn’t take long for him to be convinced that this newfangled NFT thing could work out.

“With sports cards, if you boil it down to what it is, it sounds kind of idiotic anyway, right? Someone printed something on a piece of cardboard, and now it’s valuable?” he asks incredulously.

In comparison, Top Shot had a lot going for it. “[A card] is a static image from God knows when. But when you leave an NBA game, you remember those moments. And the NBA bottled them up with Top Shot. They are memorials from that very moment.”

Ghahary was, at least for a time, more right than he could have anticipated. He started picking up Top Shot pieces in December 2020, and within a month, pandemic pandemonium had followed in his footsteps. Top Shot’s secondary market sales exploded from under $10,000 per day in November to nearly $7 million per day in early January, according to data from CryptoSlam.

Sales continued to rise. The Top Shot frenzy reached a sharp peak on February 22, 2021, when a staggering $45.8 million worth of collectibles were traded in just 24 hours.

Then the Everything Bubble started deflating.

Top Shot interest peaked just after the Dow Jones Industrial Average itself, cooling along with the prices of bitcoin and stay-home stocks. Daily volumes slowed to around $2 million per day by May 2021 and continued to decline – although even today they are about 10 times higher than when Top Shot launched.

Then came the NFL All Day launch in August 2022. While daily secondary market volumes rose as high as $1.1 million that September, they never came close to Top Shot’s peaks. Trading of the All Day collection has settled to around $60,000 per day, slightly below Top Shot’s current levels.

Ghahary says he wasn’t primarily motivated by financial speculation, so he stayed in the market while things cooled. Today, he says he has about 4,500 Top Shot items and close to 1,000 pieces in the NFL All Day series.

From his vantage point as a sports fan and collector, Ghahary identifies a few factors that made the difference between Top Shot’s rocket to the moon and All Day’s more modest reception.

Some of it came down to differences between the functions of the two collections. “The [All Day] the website itself is not as good as Top Shot, says Ghahary. “It doesn’t have all the same features, which is a bit confusing. Because it’s both Dapper Labs, you’d think they’d use the same technology, but it’s very much a separate project.”

Ghahary believes an even bigger factor was the supply. In January and February 2021, when Top Shot interest exploded, Ghahary says the offering of Top Shot’s early “Moments” was out of sync. Most of the highlights in the collection’s first series were released in editions of around 4,000. This scarcity, along with restrictions on withdrawal of funds from the platform, helped drive prices up sharply in early 2021.

Then in March 2021, Dapper Labs adapted to Top Shot’s new popularity by increasing edition sizes and rarity levels. According to a Dapper spokesperson, the largest editions went up to 60,000, and some players had even created two moments in that amount.

“I guess there was demand,” says Ghahary, “because when they sold packages [at that time], it would be sold out. And you can turn it around and make money. But as they pumped out more supply, values ​​began to fall, and people began to leave. Even if you’re a big sports fan, if you buy something for $2,000 and it’s worth $20 two weeks later, that’s not good. And that way of thinking can sort of kick in.”

Ghahary believes that was even more true for the most coveted items in the NFL All Day collection. Dapper Labs “didn’t really protect the lack of these moments that should be their most valuable. Tom Brady’s debut moment should be the most valuable, but if you make 10,000 of them … people won’t value it as much.”

Ed Ronson is another Top Shot and All Day collector who came to the NFT world through a passion for sports. In the early days of Top Shot, he says many buyers weren’t that interested in sports at all.

“There were different types of collectors, maybe coming from the crypto space.” Many, he says, saw Top Shot as a way to diversify crypto investments, summarizing their motives as “‘[ether]jumped and I put it into Top Shot. I have no idea who these players are, I can only look at the rosters.’” These participants may have made the price bubble in early 2021 both bigger and more fragile. “They were more in-and-out,” according to Ronson.

Ghahary admits he wishes he had timed the market better, but he doesn’t seem too upset. As a collector rather than a speculator, the monetary value of his NFTs takes a bit of a back seat. “I’ve been buying all the time. FOMO set in – [it felt like] if I don’t get the Run It Back set now, it may be out of my reach later. It turns out I could have gotten it later for a lot less money, but I’m glad I have it.”

Ghahary also sheds no tears for the mood of early pandemic Top Shot mania. “I didn’t quite realize when I came in that a lot of other people didn’t care about the highlight itself, they just thought of it as a way to make money. It’s stressful to be part of the community when people freak out [price] and complaints. The rights that are in the room don’t really sit well with me.”

In response to the supply failures caused by Top Shot’s brief price spike, Dapper Labs says it has limited the maximum number of a single Moment created to 10,000. It has also lowered the number of Moments in the current fourth edition of Top Shot to 16,000, which it says reduces access to some players’ moments by as much as 85% compared to previous editions.

At the same time, Dapper says that the total supply of NFL All Day coins is greater than Top Shots, “with the intention of ensuring that our collective team was not too limited by the supply.”

Ed Ronson speculates that Dapper made All Day bigger, especially because it didn’t want a big initial price hike, or the fleeting speculative attention it attracted.

“My thought was that Dapper was careful not to replicate [with All Day] what happened with Top Shot, when it really stepped up, probably for a good reason … All Day probably benefited from not having that spike of Top Shot.”

There are many good reasons to avoid a short-term increase in demand for a collectible, not least because it sets unrealistic expectations. The NFL All Days rollout “seems like a more organic kind of growth,” Ronson says. “Top Shot still needs to adjust from February 2021 highs.”

So while All Day may look overwhelming from a financial perspective, it appears to be building a better foundation for long-term success. “It seems like a lot of people who stick around are really focused on the product itself,” says Ronson. “People with higher net spend throughout the day tend to be true fans.”

It’s worth remembering that sports trading cards, the inspiration for Top Shot and All Day, were little better than junk for decades after they first appeared. Probably the most sought-after baseball card in existence, the T-206 Honus Wagner, was a free prize included in tobacco pouches between 1909 and 1911. At the time, no one talked about its value as a collector’s item—but one recently sold for $7.25. million. Prizes like that are built on more than just rarity—they rely on mythology, narrative, and other intangibles (which the Wagner card has in spades).

While NFTs may never have the poetry of a cardboard gift, they do have one distinct advantage over their analog ancestors: community. While Ahmad Ghahary estimates that he is a little under the water on the market value of his vast collection, the shared passion of Top Shot and All Day collectors has been far more significant than any financial impact.

“I’ve really made some new friendships,” he says, through both online social circles and special events Dapper Labs has invited him to as a Top Collector. As a busy professional, he says, “it’s hard to do that sometimes.”

Community is often thrown around as a buzzword by NFT collections, but it’s hard to parse exactly how images of cartoon penguins are supposed to bring together a real community based on shared interests. With its sports franchises, Dapper Labs has a much clearer path to something sustainable—even if it will take some time to return to the market prices it saw in its passionate, tumultuous early days.