Last Monday was one of the biggest televised events of June – Game 5 of the NBA Finals. So, naturally, crypto exchange Coinbase jumped at the opportunity to air an ad mocking crypto’s more enthusiastic naysayers. A series of tweets declaring “crypto is dead” — some new, others almost a decade old — fade in and out over a rendition of Chopin’s funeral march. Then a new slogan pops up in bright blue letters: “Long live crypto.”
The very next day, Coinbase laid off 1,100 employees, about a fifth of its workforce. Perhaps the naysayers were on to something: The prices of Bitcoin and Ethereum, the two most popular coins, have plunged more than 70 percent from pandemic highs; the NFT market has collapsed; and optimism is in short supply. Everywhere you look, dominoes are falling: one prominent firm, Three Arrows Capital, is reportedly on the brink of collapse, while other companies are desperate for bailouts to stay afloat. In the last three months, the crypto market has lost more than $1 trillion. (A Coinbase spokesperson explained the timing of the ad, saying it was “part of a pre-arranged package that came with our sponsorship of the NBA.”)
And yet the overwhelming feeling with many of these companies, even as they bleed dry, is that crypto isn’t really dead at all. Across the industry, you can see the rhetorical gesture of this Coinbase ad — an insistence on the idea that investors and viewers are all taking the recent downtrends a little too seriously. You’d think that a crash of this magnitude — the first since crypto fully entered the mainstream — would be a humbling moment for the industry, one that would force some of the movement’s biggest proponents to settle down and build more stable systems . But at this point, many crypto kings refuse to even think about it.
It’s no coincidence that the companies that think the least are the ones that have their hands deepest in the cookie jar. Part of what fueled the current crash was a cryptocurrency called TerraUSD, a type of so-called stablecoin that is said to be more or less equivalent in value to the US dollar. The whole point of stablecoins is that they are meant to be less volatile than other cryptocurrencies, a way of protecting your funds while keeping your chips in the casino. At least that was the idea: TerraUSD was tied to another cryptocurrency called Luna, and when its value plummeted in early May, investors promptly dumped their TerraUSD. Tokens that were supposed to be sold at $1 a piece were suddenly trading for next to nothing, and loudly Bloomberg$60 billion in investor funds were zapped away.
Do Kwon, the 30-year-old co-founder of the company that created Terra, responded to the chaos with a simple proposition: Terra 2.0. It would be like Bear Stearns launched “Bear Stearns 2.0” in 2008, an act of hubris so extreme it almost defies belief. Kwon, not responding to a request for comment, restarted the new tokens with a slightly adjusted battle plan, and Luna owners approved the restart. While the rest of the world awaits more concrete answers on that $60 billion, Kwon Terra has doubled down on 2.0 with a number of Twitter threads. But the confidence is of course not there – after an initial upswing, the price has steadily fallen.
As the broader crypto market has faltered in the weeks since Terra’s collapse, other struggling companies have been similarly unwilling to publicly reflect on the damage. Crypto lender Celsius Network made it big by promising returns much higher than traditional bank accounts. This approach made tons of money during the crypto boom, but apparently it didn’t fare as well during the downturn. When rumors of Celsius’ financial troubles began to circulate, company founder Alex Mashinsky dismissed everything as “FUD,” a cryptographic acronym for “fear, uncertainty, and doubt.” “Do you know any person who has a problem retiring from Celsius?” he tweeted. A little over 24 hours later, the company froze all withdrawals and locked customers out of their accounts. (The freeze persists almost two weeks later.)
Mashinsky, whose Twitter profile picture depicts him as a Roman emperor with laurel wreath and all, has gone black on social media, disrupting the company’s regularly scheduled “ask me anything” sessions. A company statement released a week ago sheds little light on the situation: No word on the whereabouts of investors’ funds or ongoing investigations by regulators in at least five states. (Celsius and Mashinksy did not respond to a request for comment.)
Although the company now displays a murky banner on its website referencing the freeze and has published a brief FAQ about it, Celsius is still touting a product with “military-grade security, transparency at the highest level, and an all-round app around you.” to help you meet your financial goals—whether you’re HODLing long-term or trading daily.” (HODL is an intentionally misspelled call to “hold” your coins even if the value of your investment goes down.) The implicit message is, that customers should continue to trust Celsius even as the walls begin to close.
Across the industry, the biggest crypto players feel that if we all just keep the faith, traders can fund their way out of the crisis effectively. Cameron Winklevoss, the billionaire co-founder of crypto exchange Gemini, recently tweeted that the bitcoin dip feels “irrational” because “the underlying fundamentals, adoption and infrastructure have never been stronger.” It’s not a matter of fundamentals, however; Asking people to take a closer look at the technology isn’t going to end the bear market anyhow. A few days ago, Michael Saylor, whose software company MicroStrategy has spent billions of dollars acquiring Bitcoin, called cryptocurrency “a lifeboat tossed onto a stormy sea, offering hope to anyone in the world who needs to get off their sinking ship.” But now, bitcoin is the sinking ship.
I don’t pretend to know the best way to respond to a situation like this, but if you’re an executive hoping to restore your reputation after losing billions of dollars in other people’s money, it’s probably ideal to ditch the notion that everything will happen will be okay. No one expects crypto companies to criticize crypto — but the guiltiest players might at least tone down that “buy the dip” ethos if everyone’s portfolios start to crumble. Sometimes it is actually wise to admit defeat; At least in 2008 we weren’t subjected to a barrage of defensive Twitter antics from the bankers sleeping at the wheel.
After all, these aren’t just numbers on a screen. It’s easy to feel complacent about the crypto crash when you’ve been suspicious of the entire subculture, but a sort of mental health crisis has been unfolding on crypto-centric Reddit forums as traders find the community pitying. (Suicide hotlines were once pinned to the top of a forum for Terra enthusiasts.) People who borrowed from Celsius are on the verge of losing their homes. And when the contagion begins to infect other companies like the crumbling Three Arrows Capital, those with the least to lose will be hit hardest.
But while doubling is an awkward move, it fits squarely within the larger free-market liberalism that stretches back to Bitcoin’s origins: the idea that market corrections should help shake off the scammers and provide investors with more robust options going forward . It is up to traders to “DYOR” (“do your own research”) and make prudent investments, the reasoning goes; The government shouldn’t have to bail you out when things go wrong. It doesn’t help that the industry still feels like it has a chip on its shoulder, Rohan Gray, a Willamette University law professor who studies crypto, told me in part because of its historically difficult relationship with the traditional banking system. Crypto companies are “always trying to prove that not only are they market oriented and profit oriented, all those things that the rest of Wall Street loves,” he said, “but they also do it with that big middle finger up to the traditional ones elites.”
And yet people like Kwon and Mashinsky are the elites. The wealth of the industry is creating a new set of rules in real time: Newly minted crypto billionaires are already pouring money into the media and politics to create new institutions that better match their ambitions. In a way, the crypto project is about bypassing the safeguards and guard rails we associate with traditional finance. Maybe that worked in 2013 when Bitcoin was more of a niche curiosity — but now that crypto has skyrocketed, things are different. When the numbers pick up again (and they almost certainly will), you can expect a whole lot of I-told-it-it-already from that same crowd. But if these giant companies don’t show a sense of responsibility, we could end up right where we started.