While .xyz did well in its first two years, prior to the ill-fated penny offer. It came back in recent years for several reasons, including the branding move toward single-word names, and the dearth of single-word .com within startup budgets.
The web3 association played a critical role though:
The systematic and impressive work by Swetha to acquire many of the best .xyz names, and to price them at a level recognizing the worth that she saw in them, has no doubt contributed much. Web3 startups expect to pay a solid price for .xyz, but not as much as they would pay for the same term in .com.
-Bob