What the crypto crash means for fashion’s Web3 projects

The NFT and PFP collector community have been in higher spirits than most, and fashion collectors have been particularly removed, says Tobi Ajala, founder of digital agency Techtee, who has worked with Gucci, Givenchy, La Perla and Nike. “Although a part of the NFT and PFP collector community obtains assets to resell for profit, within luxury fashion and culture, that turnover rate is substantially less, partly due to the loyalty and the proximity to the fashion brands that purchasing these collectibles provides.”

Still, there will also likely be less money in the industry invested in Web3 startups, and the startups who held their treasuries in FTX now have to raise again from investors, says crypto expert Sophie Wiberg Holm, co-founder of Dam Finance and adviser to Gwyneth Paltrow and Reese Witherspoon. “You’re not talking about rich investors becoming less rich,” she says. “The company made a huge push in emerging economies, saying, ‘Buy crypto and store it on FTX.’ Those funds are now gone. That is the people it hurts, and we are only starting to see the effects of this.”

Holm adds that the “risk appetite” of big brands or celebrities might be another casualty of the chaos. “FTX was associated with big celebrity names who made crypto and NFTs fashionable as digital art became en vogue and more valuable,” says Saswata Basu, blockchain expert and founder and CEO of decentralised storage network 0Chain. American football quarterback Tom Brady, who invested in FTX and starred in a 2021 ad campaign for the platform, has scrubbed his Twitter account of FTX-related tweets.

More education, regulations and infrastructure

There is a common saying among Web3 natives: “Not your keys, not your crypto,” referring to the personal key code that people use to maintain decentralised custody of their own crypto wallets. FTX is a centralised exchange, meaning that people entrusted it to hold their cryptocurrencies, and not all transactions are public. As it plays out, FTX’s public downfall could usher in more awareness and education on these principles, and more guardrails that both aid and slow down progress.

While the impact would cause a dent in the perception of crypto, Basu says, this also “underlies the benefit of custodial wallets and not trusting centralised entities who do not disclose what they do with your money or how much reserves they have”.

If FTX was a decentralised exchange versus a centralised exchange, potentially fraudulent behaviour could have been seen immediately, because people can see all transactions happening in real-time, Sfermion’s Steinwold says. That’s why he and other experts are calling for a more strictly Web3 approach. “Funnily enough, FTX was a centralised company dealing with crypto and if the company itself was more ‘crypto-like’ — [meaning] decentralised — this would not have been possible,” he says. Artist Kim notes that this illustrates why the industry might benefit from stronger decentralisation, an open metaverse and strong community engagement to help people build confidence again in the future of Web3.