Crypto goes down. Have the crypto executives learned anything at all?

Last Monday marked one of the biggest TV events of June, Game 5 of the NBA Finals. So, of course, the crypto exchange Coinbase took the opportunity to run an ad that mocked the more crypto-enthusiastic pessimists. A series of tweets declaring “Crypto is dead” – some new, some nearly ten years old – disappear for a rendition of Chopin’s funeral march. Then a new tagline appears in a hard blue font: “Long live crypto.”

As early as the next day, Coinbase laid off 1,100 employees, about one-fifth of its workforce. Perhaps the pessimists were on to something: The prices of Bitcoin and Ethereum, the two most popular coins, fell more than 70% from pandemic heights; NFT market collapsed; and optimism is lacking. Wherever you look, the dominoes are falling: A top firm, Three Arrows Capital, is reportedly on the verge of collapse, while other companies are desperate for bailouts to stay afloat. Over the past three months, the crypto market has lost over $ 1 trillion. (A Coinbase spokesman explained the timing of the announcement, saying it was “part of a pre-arranged package that came with our NBA sponsorship.”)

And yet, the prevailing feeling among many of these companies, even when they bleed, is that crypto is not dead at all. Across the industry, you can see the rhetorical gesture of this Coinbase ad – an insistence that both investors and spectators take all the latest downtrends a little too seriously. One would think that a crash of this magnitude – the first since crypto fully entered the mainstream – would be a humiliating moment for the industry, one that would force some of the movement’s biggest proponents to retire and build more robust systems. But at this point, many cryptocurrencies refuse to think at all.

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It is no coincidence that the companies that think the least are the ones with the deepest hands in the cake tin. Part of what spurred the current crash was a cryptocurrency called TerraUSD, a type of so-called stablecoin designed to more or less match the value of the US dollar. The whole point of stack coins is that they are supposed to be less volatile than other cryptocurrencies, a way to protect your money while keeping your chips in the casino. At least that was the idea: TerraUSD was pegged to another cryptocurrency called Luna, and as its value declined in early May, investors quickly dumped their TerraUSD. Tokens that were meant to sell for $ 1 per. pop suddenly traded for almost nothing, and according to Bloomberg$ 60 billion of investor money was zapped.

Do Kwon, the 30-year-old co-founder of the company that created Terra, responded to the chaos with a simple suggestion: Terra 2.0. It would be like Bear Stearns launching “Bear Stearns 2.0” in 2008, a hybrid act so extreme that it almost defies belief. Kwon, who did not respond to a request for comment, relaunched the new tokens with a slightly modified battle plan, and Luna holders approved the reboot. While the rest of the world waits for more concrete answers about these $ 60 billion, Kwon doubled down on Terra 2.0 with a series Twitter feeds. But of course there is no self-confidence – after an initial rally, the price has steadily fallen.

As the broader crypto market crashed in the weeks following Terra’s collapse, other struggling companies also refused to reflect publicly on the damage. Crypto lender Celsius Network has succeeded in promising returns far above traditional bank accounts. This approach generated tons of money as crypto boomed, but apparently it did not work so well during the recession. As rumors began circulating about Celsius’ financial problems, the company’s founder Alex Mashinsky dismissed it all as “RD & D,” cryptostenography for “fear, uncertainty and doubt.” “Do you even know someone who has trouble withdrawing from Celsius?” he tweeted. Just over 24 hours later, the company froze all withdrawals, excluding customers from their accounts. (The gel remains in place almost two weeks later.)

Mashinsky, whose Twitter profile picture portrays him as a Roman emperor, laurel wreath and all, has gone dark on social media and interrupted the company’s regular “Ask me about everything” sessions. A note from the company released a week ago did not shed any light on the situation: no word on where investors’ funds are located, or ongoing investigations into the company’s activities by regulators in at least five states. (Celsius and Mashinksy did not respond to a request for comment.)

Although the company now displays a dark banner on its website that points to the freezing point and has posted a brief frequently asked question about it, Celsius also still pays homage to a product with “military-grade security, next-level transparency and versatile application.” designed to help you achieve your financial goals, whether you HODLER long-term or trade daily. (HODL is a deliberately misspelled call to “hold on” to your coins even as the value of your investment falls.) The unspoken message is that customers should continue to trust Celsius even when the walls begin to close.

Across the industry, the major crypto players feel that if we all maintain the faith, traders can really get out of the crisis. Cameron Winklevoss, the billionaire’s co-founder of the crypto exchange Gemini, recently tweeted that Bitcoin’s decline seems “irrational” because “the underlying fundamentals, adoption and infrastructure have never been stronger.” However, it is not about the basics; Asking people to take a closer look at the technology will not end the bear market. A few days ago, Michael Saylor, whose software company, MicroStrategy, spent billions of dollars on acquiring Bitcoin, called the cryptocurrency “a lifeboat, thrown into a stormy sea, giving hope to anyone in the world who needs to get off their sinking ship.” But right now Bitcoin is the sinking ship.

I do not claim to know how to best respond to a situation like this, but if you are a leader hoping to regain your reputation after losing billions of dollars of other people’s money, it’s probably ideal to drop the idea of , that everything is going to be okay. No one expects crypto companies to criticize crypto, but the most guilty players could at least downplay this “buy the dip” philosophy as everyone’s wallets start to crumble. Sometimes it is actually safe to admit defeat; at least in 2008, we were not exposed to a deluge of defensive jokes on Twitter from bankers sleeping at the wheel.

After all, it’s not just numbers on a screen. It’s easy to feel complacent about the cryptocurrency if you’ve been wary of the whole subculture, but something of a crisis of reason has unfolded on the crypto-centric Reddit forums as traders find community in commiseration. (Suicide hotlines were at one point pinned to the top of a forum for Terra enthusiasts.) People who took out loans from Celsius are on the verge of losing their homes. And as the infection begins to infect other companies, such as the crumbling Three Arrows Capital, those with the least to lose will be hit the hardest.

But while double down is a difficult decision, it fits nicely into the larger framework of free-market libertarianism that goes back to the origins of Bitcoin: the idea that market corrections should help shake off fraudsters and provide investors with more robust options going forward. . It is up to traders to “DYOR” (“Do your own research”) and to make careful investments, it is believed; the government should not have to save you out if it goes wrong. It does not help that the industry still feels it has a chip on its shoulder, Rohan Gray, a law professor at Willamette University who studies cryptography, told me, in part because of his historically difficult relationship with the traditional banking system. Cryptocompanies “always try to prove that you’re not only pro-market and pro-profit, all the things that the rest of Wall Street loves,” he said, “but you do it with that big middle finger up there too. to traditional elites.

And yet people like Kwon and Mashinsky is the elite. The riches of the industry are creating a new set of rules in real time: newly struck crypto billionaires are already pumping money into the media and politics with the aim of creating new institutions that respect their ambitions more. The crypto project is in a way about avoiding the protections and crash barriers that we have come to associate with traditional financing. Maybe it worked in 2013, when bitcoin was more of a niche curiosity, but it’s different now that crypto has grown by leaps and bounds. When the numbers go up again (and they almost certainly will go up again), you can expect quite a bit from what I told you from the same crowd. But if there is no sense of responsibility on the part of these giant companies, we may end up where we started.

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