Regulation
Resilient Strategies for Crypto Marketing Success in 2024: Overcoming Regulations and Scandals
Depending on who you asked about the cryptocurrency industry’s outlook in 2024, you would have heard an answer that varied between cautious optimism and more of the same for 2023. The prevailing bearish macroeconomic conditions of higher inflation and high interest rates have tempered expectations.
Even with the possibility of a final approval of the Bitcoin ETF in the US and the upcoming Bitcoin halving, many thought the headwinds were too strong and that the explosion in popularity of AI would divert all the VC money still available.
As we enter the second quarter of 2024, most people are shocked by how strong and resilient the industry is proving to be. The popularity of Bitcoin ETFs among institutional investors and calmer language from the Federal Reserve have spurred renewed interest in this highly volatile asset class.
But what can we learn from the mistakes of the last bull run, and how can we overcome the reputational damage caused by cryptocurrency scandals while navigating this new regulatory landscape?
How we got here
It seems like a distant memory, but 2021 was a banner year for the industry. Most crypto projects were hitting all-time highs, staking and lending protocols like the Anchoring protocolthey offered returns above 20%, and charismatic founders like Do Kwon, SBF, and Alex Maschinsky were hailed by the mainstream media as the next Steve Jobs.
However, there were warning signs that market sentiment was about to change and that these new prodigies were nothing more than scammers and charlatans preying on the sentiment of the overvalued market.
Even before the 2021 bull run, analysts were highlighting the potential pitfalls of some of the most popular projects of the latest cycle. In April 2018, former Chief Risk Officer at MakerDAO and Research Analyst at Scaler Cyrus Younessi correctly identified the critical point of failure in Terra Luna:
“If the Earth were to fall and break the peg, then it would depend on the Moon to save the Earth. But the Moon would fall as investors panic, and then the Earth would continue to fall, and then they would continue to contribute to each other’s demise.
Crash in 2022, bear market in 2023
The euphoria felt across the market in 2021 will end abruptly in 2022 with the first of many dominoes falling with the collapse of Terra Luna.
Earth’s ecosystem
In one of the most notable collapses of this period, the Terra ecosystem’s flagship protocol, LUNA, and the algorithmic stablecoin (UST) lost their peg to the US dollar, causing the the price will collapse to zero in a few days. LUNA’s fall from grace was made even more spectacular by its founder Do Kwon’s arrogance in promoting its strength and stability.
Celsius
For much of 2021, Celsius has been considered a premium centralized lending platform. Its charismatic founder, Alex Maschinsky, has aggressively promoted his return on investment above 20% and has become the de facto gatekeeper of retail and institutional investors. However, the model became unsustainable due to market changes and the underlying assets starting to lose value. It was revealed that Celcius was using Ponzi economics to support the platform. It was borrowing new deposits to make up for the lack of funds to pay for the high yields and the entire platform collapsed under the weighttaking investors’ deposits with them.
FTX
No project has been as popular or successful during the 2021 bull run as the centralized exchange FTX. It rose to fame due to the reputation of its founder, Sam Bankman Fried, as a dominant arbitrage trader at his first firm, Alameda Research. He was an enigma that the media fawned over as he embraced the lifestyle of a humble billionaire touting the benefits of the philosophical lifestyle of effective altruism. FTX has become the number one exchange globally, signing massive celebrity endorsements from Larry David, Tom Brady and Steph Curry. FTX had become so deeply entrenched in the industry that it required the projects it supported to keep their assets on the platform when it collapsed, has impacted virtually everyone in the space. The once-dominant exchange was ultimately undermined by Binance founder CZ after he publicly sold Binance’s entire stake in the FTX utility token FTT after it was revealed that SBF was using customer deposits to hedge Alameda losses and using FTT to make up the price difference. balance.
Changing regulatory landscape
2022 has thrown the cryptocurrency industry into a deep bear market from which we are only beginning to emerge today. The industry was largely left to self-regulate, with the SEC only intervening in cases of clear criminality. However, the experiences of 2022 have led many people to heavily criticize the SEC’s approach, particularly Chairman Gary Gensler and the close relationship he had with SBF and Alameda Research CEO Caroline Ellison.
In a change of tone, the SEC and Chairman Gensler began pursuing lawsuits against anyone and everyone they could, in an aggressive move toward a policy of regulation through enforcement. The change has impacted individual projects such as Ripple, Library and Tornado Cash. This shift has also resulted in consistent delays in postponing SEC regulatory decisions, particularly in relation to Bitcoin ETF approvals, as well as targeting bona fide players such as centralized exchanges__Kraken__ AND CoinBase. Kraken and Coinbase have been asking for clear regulations to operate for years. For the problems it encountered in trying to remain compliant, the SEC filed lawsuits against each for operate unregistered stock exchanges
In late 2023, the SEC went on a trophy hunt and emerged with the arrest of the CEO of the world’s largest cryptocurrency exchange (Binance), CZ. CZ pleaded guilty to money laundering charges and now faces over ten years in prison, while the exchange was fined $4 billion.
The SEC’s policy change represented a direct attack on the industry. However, ultimately, it has caused greater harm by undermining these companies’ ability to operate in the United States, creating confusion and an environment of ever-changing regulatory targets.
Constant hacks and robberies
Despite the SEC’s new approach to the industry, robberies and hacks across the industry remained rampant throughout 2023. for a total of over 1.7 billion dollars.
While 2024 is once again proving to be a hotbed of crypto hacks and scams, in the first three months for a total of over 437 million dollars. With Bitcoin’s impending halving and its historical trend spurring the next bull run, it’s relatively safe to say that this problem will get worse before it gets better.
Outlook for 2024
So, with all the negative sentiment built up in the industry since the last cycle. How can we stand out and market the industry in a positive light?
If we learned anything from the last cycle it’s that the product needs to take center stage rather than a charismatic leader. It’s easy to get caught up in the excitement when the market moves, but we need to remember the fundamentals of DYOR.
Accountability towards the bad actors of the last cycle is also key. We are starting to see how the criminal activity of these prodigious founders was not because they were operating in the cryptocurrency world, but because they were criminals. SBF and Maschinsky committed embezzlement and financial crimes because they took advantage of user funds, not because of anything technology-related. They are more like Bernie Madoff than Satoshi Nakamoto. Explaining the difference will be key.
We should also take comfort in the fact that, despite Chairman Gensler’s disdain for the industry, his tenure will be limited, other SEC presidents and women have dissenting opinions (Hester Pierce) to the SEC and her legal challenges to reign in the industry they often fail.