The Origins of "HYPE": Snapshots from the NFT Market

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Feature Alert

Hype — is an everyday slang used for the high-level excitement which often originates from increasing prices and public interest in a specific market. Hype is as old as the free markets. It is mainly explained by the human tendency to exaggerate and succumb to greed. The earliest hype in history is the “tulip hype” (the Tulip Mania for its original name) which led to one of the most significant bull runs we have ever seen. Trying to capture periods of the hype is a great way to learn about the background of a particular market and the foundation of the psychology of its participants. So, let’s dive into the periods of hype in the NFT market starting from conception.

In 2017, an inevitable hype was reached in the NFT market since the cryptocurrency market as a whole was on fire, but NFTs were mainly popular among early adopters, and most people did not know about them. For example, Cryptopunks was released in June 2017, but it became famous in 2021, with celebrities (even companies) putting them as their avatars on social media. In late 2018, the art category dominated the NFT world; CryptoKitties is the most iconic collection of that period. After January 2019, other types began to gain importance in trading volume and popularity.

In 2019, Nike started traction in the market when the company got into the business with an NFT project called "Crypto Kicks" and received a patent that allows it to be added to physical products such as a pair of sneakers. The total trading volume of NFTs was $64 billion, and the transaction count increased from around 30,000 to 80,000 per week. In September 2019, NBA player Spencer Dinwiddie tokenized his contract so others could invest in it. These were the leading accelerators of excitement in the market then.

In 2020, the NFT market became even hotter, and the center of the heat was the “DeFi Summer,” which resulted in the trading volume reaching a jaw-dropping amount of $250 million. The market capitalization, which represents all assets' total value, has surpassed $338 million.

The most important and life-changing event of 2019 was the Covid-19 pandemic, which led to an immense digitalization trend. In this period of market hype, the traction has started with the initiatives of sports clubs. Since the revenues of sports clubs decreased sharply due to the social distancing measures, they had to find creative ways to preserve fan engagement. NFTs ran for help. We have seen sports clubs releasing NFT collections or collaborating with NFT projects that will allow fans to support their clubs.

Then the bull-run of 2021 occurred. The market was on the rise, and the “hype” was starting to form on the market again. Until March 2021, the spotlights were mainly on cryptocurrency projects. But on March 11th, a groundbreaking event dropped like a bombshell. Mike Winkelmann’s, also known as Beeple, NFT artwork called “EVERDAYS: THE FIRST 5000 DAYS” was sold for 69 million dollars in an auction at the world’s most famous auction house Christie’s. NFTs became headline news on almost every outlet, and the “hype” started to do its magic. Celebrities, big companies, and politicians were publicly announcing that they own NFTs. By virtue of “hype”s sacred work, many new use-cases have emerged for NFTs, and many new opportunities were created primarily with the rise of the Metaverse.

We have discussed the market hype from a broad sense and covered the periods of hype in the NFT market. Now, let's discuss the project hype that we have seen existing around specific projects and turning them into the sector's flagships. Interestingly, these projects have managed to create excitement primarily independent of the rest of the market. The first of these collections is the well-known CryptoPunks.

The most crucial reason for CryptoPunk’s success was that it was one of the earliest collections created in the sector and the Larva Labs’ successful marketing strategy. When it was first launched in 2017, it was only known among a small number of people who are deeply interested in cryptocurrencies. Larva Labs managed to create a solid brand perception of the collection, making owning a CryptoPunk tantamount to being a crypto OG. If you have a CryptoPunk as your Twitter profile picture, you are a member of that visionary and venerable little club of explorers. So much so that many celebrities and large organizations have chosen to own a CryptoPunk to express their support for crypto technology and culture. Of course, it is debatable how many of these megahit purchases are real and how many are marketing activities. Still, the success of Larva Labs is undeniable, where CryptoPunks are today. Now, it is evident that the community is doing their work and protecting the collections’ prominent place among other collections in the market.

The other project we will examine is the Bored Ape Yacht Club (“BAYC”). Yuga Labs, the creator of the collection, managed to create the first project that has dethroned CryptoPunks by trading volume as of today. One of the most critical factors behind BAYC's success is Yuga Labs' innovative and pioneering solutions to preserve and maintain community engagement. The company has created a metaverse, many creative games, charity events, and a private club that holds exclusive events and parties for BAYC NFT owners. Yuga Labs have managed to maintain BAYC’s popularity by creating this unique experience of being a member of a highly exclusive community. Holding an Ape is an exquisite experience anyone would want to be a part of. On the other hand, having a Punk is a statement that someone would want to manifest others with her engagement and vision of the crypto space.