Azuki was one of the most promising NFT projects in 2022 until its wings were clipped mid-flight due to an administrative error. Instead of competing with the Bored Apes, the “Internet Skaters” fell off their skateboards and landed flat on their faces.
While countless NFT projects have been launched since the NFT avatar scene exploded in early 2021, few have gone from zero to hero, and even fewer have circled back. But Azuki did precisely that: after reaching peak hype within months of its release, it fell into mediocrity.
Azuki was one of the few avatar NFT collections that everyone thought had done everything right when it was launched in January 2022 by four anonymous founders. Chiru Labs, the startup behind Azuki, executed so well that many quickly became convinced the project could become “the next Bored Ape Yacht Club”—then and still the most prized NFT collection in the nascent industry. Christian Williams, the Editor-in-Chief of Crypto Briefing, praised the collection in an April column, advising teams hoping to create the next six-figure blue chip avatar to take note of Azuki’s superb execution.
And he wasn’t far off the mark back then. Azuki’s art was and continues to be exceptional. The lore is excellent. The neighborhood was alive and growing. The roadmap, or “mindmap,” as Azuki called it, was promising and well-thought-out, but perhaps most importantly, it existed. So many of these NFT collections lack a roadmap, a team capable of carrying it out. Azuki appeared to have it all and was fortunate to be recognized by the community. The 10,000-item collection quickly sold out, with each item selling for about 1 ETH. Sales on the secondary market began immediately, reaching a floor price of about 7 ETH just a few days after release and about 15 ETH by the end of the month.
By mid-March, the collection’s floor price had dropped to around 9 ETH, and interest had begun to wane, but then Chiru began delivering surprises that the community couldn’t get enough. First, the team airdropped 20,000 “something” NFTs to Azuki holders on March 30, reigniting speculators’ interest in both the collection and the airdropped things. The unpacked digital presents—later revealed as Azuki sidekick avatars dubbed BEANZ—reached a floor price of about 3.14 ETH a day after the drop, putting the total value of the airdrop at more than $213 million. This amounted to a $21,000 payout for each Azuki avatar collector.
The collection’s floor prize nearly doubled in the days leading up to the airdrop, from around 9 ETH to approximately 18 ETH. It nearly doubled again in the days following the drop, reaching about 34 ETH, worth roughly $115,000. In April, the so-called “Internet skaters” were at the top of the hype cycle, doing Bean Plants and drawing awe and applause from most of the digital collectibles community. On NFT Twitter, rumors that Azuki could become a blue chip player and even flip BAYC began to circulate. In April, the floor price of BAYC rose from around 110 ETH to a record high of about 155 ETH, while Azuki was trading at approximately 30 ETH.
That is, until one of Azuki’s anonymous founders, going by the handle Zagabond on Twitter, made the grave error of discussing his previous failures.
Zagabond published a blog post titled “A Builder’s Journey” on May 9. In it, he discussed his previous failures in the NFT space and outlined some of the lessons he learned along the way. “It’s critical that the community encourages creators to innovate and experiment during these formative years.” “Each experiment also comes with key learnings,” he added.
While his intentions were good, in retrospect, it was one of the worst mistakes Zagabond could have made, as it only tarnished Azuki’s impeccable brand by linking it too risky projects that many in the community later labeled as outright scams. He revealed that he was the project leader for CryptoPhunks, Tendies, and CryptoZunks, three NFT projects that would eventually go dark.
CryptoPhunks—the first NFT collection to achieve blue chip status—was hit with a Digital Millennium Copyright Act (DMCA) takedown request, forcing Zagabond to abandon it. But, as one Twitter user pointed out, he didn’t do it without first making money. According to on-chain data, the creator of CryptoPhunks executed a “wash trade” on the NFT marketplace LooksRare for a profit of 300 ETH after increasing the creator royalty rate to 5% months after the company went bankrupt. Wash trading is a type of market manipulation in which trading volumes for a specific asset are artificially inflated. It is prohibited in traditional markets because spiking trading volumes may mislead investors into believing there is genuine interest in the investment.
Tendies, Zagabond’s second NFT experiment, was a flop, with only 15% of the collection minted at launch. On Twitter, one collector going by the handle 2070 pointed out that Tendies was essentially a rug pull. According to an anonymous collector who allegedly took part in the Tendies mint, the project abruptly ceased all activity after the launch, deleted all social media, and closed the Discord channel within a month of the mint.
Zagabond was fired from CryptoZunks for engaging in questionable behavior to promote the project on social media. He allegedly posed as a woman named Amanda and used a female CryptoZunk profile picture on Twitter before the launch. Many observers saw Zagabond as an opportunistic NFT founder who jumped from one project to the next without regard for investors until he struck gold.
To top it all off, when Zagabond did strike gold with Azuki, he managed to turn it into a lead by seriously jeopardizing the project’s reputation. Azuki’s price floor more than halved in the days following the publication of his blog post, plummeting from around 20 ETH to about 7.5 ETH.
And while Azuki’s continue to command a high price, with the collection ranking eleventh in total market capitalization, their decline—measured from their peak to their current price—is difficult to overstate. Azukis’ all-time high floor price was around $115,000. Today, it’s around $12,000, representing a nearly tenfold drop from the peak. In comparison, the all-time highs for CryptoPunks and BAYC were approximately $440,000 and $435,000, respectively, and they now trade for roughly $127,000 and $114,000, respectively.
The silver lining in this story is that Azuki’s demise can be used to teach NFT collectors an important lesson. No matter how promising, every reputation-based project is one naive mistake away from fading into obscurity.