The Bored Ape Yacht Club Death Spiral Explained

AOTB Anti-Echo Series

Hello Bubble Riders!

The Bored Ape Yacht Club (BAYC), which is the world’s most valuable NFT collection, faces the real possibility of collapse in a death spiral. Here is the case in a nutshell.

1. Celebrity adoption drove BAYC’s rise and recognition

2. Celebrity adoption was artificial (they were paid to promote it)

3. Too much of the BAYC imagery is racist (if unintentionally so)

4. Should the “#BURNBAYC” meme catch on more, then celebs will abandon BAYC out of caution.

5. With celebrities abandoning the project, others will follow … and so goes the death spiral.

I don’t think the first three points are debatable. The first is obvious to anyone who knows about the project. Point 2, which is demonstrable with on chain analytics (and we’ll skip that here), only matters to support the point that celebs don’t have an emotional connection to the project anyway. This makes it all the more likely that they’ll abandon BAYC to preserve their public reputation.

With respect to point 3, even if people want to debate the possibility of racist imagery, that misses the point. What matters is whether enough people think the imagery is racist to get celebs to abandon BAYC out of caution.

How many celebs want to be associated with possibly racist projects? How many would rather burn an NFT, even one worth $1m, than lose their entire career? I think most would.

We’re going to review the core of these claims in this article as part of our Anti-Echo Chamber series. This is a series that listens to the critics to break through (or at least try) any echo chamber so that members in our community can avoid holding onto the next LUNA.

Our paid subscribers get regular updates about unexplored risks in the crypto space. That way they can stay safe during this crypto winter. But I really think that everyone can profit from this analysis, which is why I decided to publish it for our free subscribers. Let’s start with how I came to this conclusion.

1. An Unlikely Journey

I started down this path because BAYC looked relatively cheap. As most of you know, I’m really more of a DeFi specialist than anything in the crypto world. I need data to make sense of an investment and I just couldn’t get enough data on NFTs that made sense to me.

So, I missed BAYC even though I knew about the project early on. When I undertook some research recently, however, I noticed that bluechip NFTs, like BAYC, weren’t really losing value relative to ETH. I explored this in “The Curious Story of NFTs in a Crypto Winter.” Here’s the core image.

You’ll notice that while the NFTs are down in dollar terms, they are up in ETH terms.

So, I decided to begin tracking top level NFT projects. Maybe as this crypto winter progresses–and I expect ETH to drop into (and stay) the $900 range–I could pick up a BAYC NFT on the cheap. That was my thinking.

First, I reviewed their strong points: community, celebrity endorsement for brand recognition, an evolving metaverse with Otherside, and IP ownership. Finally, I will say that the Yuga Labs team is impressive in their ability to market.

Then I checked the actual NFTs on OpenSea and found something that looked like this.

I’ve been a denizen of the internet for a while, so that 88 number struck me. It’s an established white supremacist number for Heil Hitler as ‘h’ is the 8th letter in the alphabet.

My first thought was that it must be a fluke, but as I checked through the listed prices of NFTs, it seemed like it wasn’t. I kept of finding bored apes listed at either 88 ETH, dominations of 88 ETH, or (most commonly) ending in xxx.88 ETH. For example, look at the Ape to the far right on this one.

This still might have been a fluke, but  it started me down a strange due diligence path which lead to the present report. It didn’t take me long to end up on this site by Ryder Ripps, gordongoner.com, so let’s start there.

2. Ryder Ripps

To be really clear: Ripps’ claims are definitively in the conspiracy theory territory. Much of his supposed “argument” looks like nothing other than a series of coincidences. So I can understand why, when the matter began to crop up, Yuga Labs has repeatedly defended their intentions (read their latest defense here)

I won’t review Ripps’ arguments as I don’t think they’re worth our time. Rather than get bogged down in the details, it would be better to point out that his argument forwards the wrong kinds of reasons. This is to say, they’re not the sorts of claims that could support a sort of BYAC take down as he envisions.

All of Ripps’ evidence aims to establish that the creators of BAYC intentionally created an NFT collection with white supremacist imagery to advance the white supremacist cause (which cause is encapsulated in the 14 words). To understand why, let’s review three fairly obvious points.

First, it’s super hard to establish the intentions of an artist by looking at a work of art. And even if you could do that, the meaning of the work of art may extend beyond what the artist originally had in mind anyway. The art is “out there” for everyone to assess. It’s not reducible to what the artist had in mind, because art isn’t only a subjective activity.

Second, it’s even harder to show those intentions when your argument is literally that the artistic group is communicating a message covertly via esoteric imagery (i.e., imagery generally only known to other white supremacists or academic researchers).

Finally, there is little apparent motivation for Yuga labs to promote a white supremacist cause. The creators of BAYC are Jewish, Turkish, Pakistani, and Cuban. You can watch interviews with the CEO, who is also Cuban, and she appears genuinely horrified by the suggestion that the art is racist. Granted, she might be a great actress, but then I resolve back to this point: why would a Latin support a white supremacist cause? Why would a Jewish, Turkish or Pakistani creator?

(Image of YUGA Labs CEO Nicole Muniz from this video).

That Yuga Labs intentionally created racist art to forward a white supremacist cause just doesn’t make sense to me. I think there’s a better explanation for what’s happened.

3. Hanlon’s Razor

My own approach makes use of Hanlon’s razor. That’s the principle often summarized by the line: “never attribute malice to that which is adequately explained by stupidity.”

I think “stupid” is too hard a term. “Naive” is probably better.

My sense is that the BAYC artistic team used a set of images which are popular on the internet as their inspiration. The problem is that some of those images, unknown to them, derived from 4 Chan lore. As a result their whole project got caught up in a universe of racist symbolism.

If you don’t know what 4 Chan is … well, let’s put it this way. 4 Chan is a website which houses the dregs of the internet. It’s a home to white supremacists and others who often join up to “troll” projects for the “lulz” (= laughter at another person’s pain). Here’s a link to some of their hateful memes.

To show you how that imagery permeates BAYC, you’ll need to a bit of background. To start, you need to know that 4 Chan loves Pepe the Frog imagery and that it’s become a staple among white supremacists. The anti-defimation league entered it into their database as a hate symbol in 2016, even though it started out as a totally innocent symbol. Here’s the original image.

Yes, Pepe was originally a stoner frog. You can read some more about Pepe’s strange transformation from stoner to white supremacist symbol here (and yes, the internet is a weird place).

The problem for BAYC is straightforward. Many of their images bear uncanny resemblance to Pepe the Frog memes from 4 Chan. Have a look at six of them (and there are more).

As mentioned, it looks as though the artistic team used popular memes for inspiration. The difficulty is that BAYC imported the imagery uncritically, while 4 Chan did set out to make white supremacist images (because, that’s what they do).

Now you might be wondering how that imagery is racist. “Ok,” you might be saying, “I see how the Pith helmet (middle right), used by Imperial England when colonizing Africa is a problem. But what’s wrong with the guy who has a pointy hat (top left)?” 

That’s a Prussian Helmet. Here’s another version of an ape with it. After WWII, Germany rather sensibly banned the display of Nazi symbols. But humans are crafty animals. So in response, white supremacists adopted symbols from Imperian Germany as a substitute. That helmet is from that era and is part of “modern” Nazism.

If you never knew that, then you’re probably a decent person. Again, it’s only academics who study culture and white supremacists who would typically be in a position to know any of this. But whether or not you knew, the symbol has an established use in this way and the anti-defimation league has registered such symbols as hate sumbols.

Similar points hold for the other images. The sushi chef headband (top right) sports the symbols Kamakazi–part of Imperial Japan’s WWII military, and not the sort of thing that an actual sushi chef would ever wear. The Fez (bottom right) could be a reference to the Otoman Empire, but there is a Nazi Fez too

And where the imagery isn’t tied directly to Nazis or colonialism, it is tied to 4 Chan’s love of hierarchical power–which is integral to the broader fascist world view. The Ace of Spades helmet derives from the practice of US forces in Vietnam. The Ace was known as the “death card” as US soldires would place an Ace over dead Vietnamese soldiers. The substituion for the J only makes it more problematic, as tilts decidedly towards the anti-semitic (J for Jew). The Russian Ushanka was used under Stalin, which is again a symbol for authoritarian power.  

Please note, none of this imagery, and none of this argument turns on the point that these are ape NFTs. An “ape” is an established term in crypto lingo and while I am bothered by the imagery in this regard, we can circumvent that discussion totally.

Given the prevalence of .88 ETH prices for BAYC NFT, it looks as though some of the original BAYC holders were part of this culture and that likely helped to spread its adoption. 4 Chan caught onto Yuga Lab’s mistake, and then they decided to aid the project for the lulz.

To reiterate my point. I am not claiming that Yuga Labs or any of their founders intended to use and promulage racist imagery. I think they just took trending items on the web and incorporated those. The problem is that they uncriticially adopted this imagery.

4. But If They Didn’t Mean It, Then How Is It Racist?

At university, when I’m not teaching logic, I teach in my other area of specialty: ethics. One of the ethics classes that I’ve taught at least annually for more than a decade is titled “Prejudice, Discrimination, and Morality.” It’s a hard class to teach because the subject matter is explosive.

The intentionality of racism is one of the key sticking points.

I don’t have the time here to review the metaphysics of symbols in detail. So, I think we can get by with just this point: the meaning of words and symbols extends beyond the intentions of the author.

Suppose you had naive Nathan who never new that the Nazi swastika was tied to the atrocities of WWII. Nathan likes the design of the flag and decides to hang in on the back of his truck while he drives around town. People call him racist for this. They inform him about the history and he says “I didn’t know about any of that and didn’t mean it.”

By hypothesis, what Nathan says is true. Does that mean that the Swastika is no longer racist? Or that it’s no longer racist “for him?” What does “racist for him” even mean?

The swastika was originally a symbol for peace in Indian philosophy, which the Nazis repurposed to their ends. That Nathan knew none of that history doesn’t make the symbol less racist. 

What his ignorance does do is serve to mitigate blameworthiness. We’d probably wonder in the case of a swastika. He’s probably culpably blameworthy for not know about something really obvious like that. But even if the symbol was more obscure, he should at least express remorse for his actions (and the community should know well enough to accept a sincere apology).

In parallel fashion, Yuga Labs should probably do something other than take a defensive posture. They could act proactively about the symbols and use community engagement to devise a creative solution. Notably, and against Ryder Rips, I think that burning the NFTs is probably not the most creative solution.

5 How to Make Money With This?

This is an investment column and I try to end my pieces with an investment thesis, so let’s return to that. I do think the symbolism in BAYC is problematic. And even if you don’t think so, what matters for this analysis how any of this will affect the value of BAYC NFTs and related projects. Here’s my investment thesis in a question.

Will enough people discuss the racist elements of BAYC to make celebs nervous about their associations with it?

If so, once celebs abandon their ownership, it is easy to foresee that the project will face the prospect of a reputational death spiral.

This mess is enought to make me want to avoid BAYC for a bit. We’re probably not at the bottom of this crypto winter anyway, so there’s no rush to pick up a relatively cheap ape NFT. I also don’t need to own APE coin, as it has terrible momentum metrics anyway.

If you do own an ape (and I know several of you who do), then you have two options. First, you could take a “risk off” position and sell your ape–perhaps at a loss, certainly at a large discount to its former value.

Second, you could try to engage the community to proactively deal with this PR problem. There are racist museum pieces that are worth millions. There are known artistic fakes that are worth millions. Admitting that some of the BAYC NFTs display racist imagery doesn’t have to sink the value of your NFTs. BAYC has made a real cultural impression, so there are reasons to think that the project would emerge in a stronger position afterwards.

I think the second way is better. Yuga Labs is to the NFT world what Ethereum is to decentralized finance. Should they collapse, it would prove a serious blow to the crypto community. And just as I like Vitalik, I love the Yuga team. In both cases, the key figures symbolize what the crypto world is about: life transforming possibilities.

Vitalik would have never been given the shot to be more than a journalist and coder without cryptos. The Yuga Labs team was made of literature nerds who might have made it as teachers. And when is the last time a young Cubana served in the role of CEO for a multi-billion dollar enterprise?

I’d much rather see the project be save than collapse into oblivion. We just need our crypto communities to start by facing some hard truths and then deciding on ways to deal with them.

This week I wrote a number of pieces that are related to this post, so you might want to have a look if you’ve missed them.



That’s it for this week. Remember to join us on Discord if you haven’t already.

Happy Trading!!

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You should expect no financial returns one way or another based on statements contained herein. These points hold equally for any statements that could be attributed to The Art of The Bubble or any related business entities or personnel operating in association with Robin Technologies and Analytics LLC. If you decide to buy or invest in anything, then your returns and potential losses are your own. No statements about taxation are taxable advice and you are encouraged to consult your own tax professional. You are also encouraged to do your own due diligence before investing in anything.

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Disclaimer

This piece of content is provided for educational and entertainment purposes only. Robin Technologies and Analytics LLC is the firm that distributes 1.2 Labs products. The firm does not provide individually tailored investment advice and does not take a subscriber’s or anyone’s personal circumstances into consideration when discussing investments; nor is Robin Technologies and Analytics LLC registered as an investment adviser or broker-dealer in any jurisdiction.

You should expect no financial returns one way or another based on statements contained herein. These points hold equally for any statements that could be attributed to The Art of The Bubble or any related business entities or personnel operating in association with Robin Technologies and Analytics LLC.

If you decide to buy or invest in anything, then your returns and potential losses are your own. No statements about taxation are taxable advice and you are encouraged to consult your own tax professional. You are also encouraged to do your own due diligence before investing in anything.

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