Over the last few years, reselling expensive and limited edition sports shoes has gone from a niche hobby to a proper business. But in China, the trade is now looking more like a bubble.

But it's not the sneakerheads saying this. It's the country’s central bank.

The Shanghai branch of the People's Bank of China issued a briefing saying that the country’s sneaker trade is wading into murky financial waters. Risks include illegal fundraising and pyramid schemes, according to the brief. Similar descriptions have been used for the murky cryptocurrency trade, and now the sneaker trade is attracting some of those same investors -- and seeing its first victims.

“I want to reassure all of you that I’m not a cheater, I’m just an ordinary person who loves sneakers,” a young trader named Cookie Liu told his customers in a video apology published on WeChat.

Liu started off as a sneaker trader only to end up 10 million yuan (US$1.4 million) in debt after the skyrocketing prices of sneakers made supply difficult to get, according to his online confession, widely covered by local media. Customers who paid for sneakers walked away empty-handed.

Cookie Liu delivers his video apology on October 14, promising to repay his buyers as much as he can, even if he lands in prison. (Picture: CookieTalks)

Modern sneaker culture can be traced back to the 1980s, especially after the first Air Jordans were released in 1984. But the modern sneaker trade has morphed into something else entirely, and it’s spanned oceans, with many people in China picking up the expensive habit.

Some people are making a killing selling sneakers online. One pair of Air Jordans sold for an eye-popping US$10,740. Now high-end sneaker marketplaces are cropping up, including Nice, DoNew and Poizon, which reached unicorn status with a valuation surpassing US$1 billion.

But much like US ecommerce platform StockX, another unicorn that profited from the sports shoe craze, some of these platforms have enabled people to trade shoes like stocks. This seems to have inspired a new type of sneaker trader, far from the typical young sneakerhead. Limited edition Nike and Adidas shoes are now seen as a hot investment tool by blockchain bros.

“WeChat ‘investor groups’ have proliferated, with group names like ‘XX Sneaker to da moon!’” said Matthew Graham, CEO of Sino Global Capital, adding that the primary interest of these investors is gambling.

“These are similar to the cryptocurrency speculation groups that appeared during 2017’s crypto boom,” he said.

The sneaker trade has also started seeping from niche ecommerce platforms to big-time cryptocurrency exchanges, where highly prized shoes are bought and sold with Bitcoin and other cryptocurrencies.

And like cryptocurrencies themselves, you don’t have to buy the whole shoe to participate. Platforms such as 55.com allow you to buy fractions of a shoe, represented by tokens. So if you want to invest in the hot Air Jordan 1 Retro High Travis Scott sneakers but can’t afford the US$1,800 price tag, you can buy a small piece for your nest egg. Whenever you’re ready to collect, you can sell off your sneaker token to the next buyer.

Sites such as 55.com allow you to buy a fraction of a sneaker. (Picture: 55.com)

In China, the trading of tokens and cryptocurrencies is banned, but this hasn't stopped some Chinese investors from using workarounds to buy them. This is accompanied by slick crypto marketing concepts that lead to excessive speculation, Graham said.

“For certain brands and types of sneakers, the increased hype has led to wild volatility and trading prices fundamentally disconnected from real-world value,” he said.

The speculation has ended up hurting the sneakerheads themselves in China. Although they’re often perceived as young fashion victims with plenty of money to throw around, some are actually relying on readily-available online loans to finance their style choices. Traders often say they got into the game in order to support themselves by doing the thing they love.

We reached out to Poizon and Nice, but they didn't respond to our request for comment.

Since the PBOC issued its briefing, sneaker-selling platforms like Nice removed their price charts. Warnings about losing money and counterfeit goods, another problem plaguing the sneaker trade, have also been circulating.

But it’s unclear whether this will dampen speculation. There’s no indication yet that interest among investors is waning. They even have a new catchphrase: “Real estate is not as good as stocks, stocks are not as good as shoes.”