Michael Saylor Was Shipwrecked, But Bitcoin Investors Needn’t Panic
As cryptocurrency investors know, the market moves in cycles. We had the up cycle when Bitcoin (BTC) and Ether (ETH) hit all-time highs, and now the bears are back in town.
One of them this week maimed MicroStrategy founder and executive chairman Michael Saylor. In this case, it was a very powerful bear – Washington, DC Attorney General Karl Racine – suing the Bitcoin evangelist for allegedly owing $25 million in unpaid taxes. MicroStrategy’s stock price fell more than 13% on the news, from $251 on August 29 to under $220 on September 1.
Yet now is not the time for investors to panic. It’s been about three months since the now infamous crash of the Terraform ecosystem – which ended the biggest bull fest known to man – and the sky still isn’t falling. The world does not end and the blockchain is more immutable than ever.
Does this mean industry leaders should stop viewing market downturns as existential threats to cryptocurrency as a business? Maybe not, given that $2 trillion in value was wiped from the cryptocurrency market capitalization after the Terraform collapse. Such extreme market events cannot be considered as volatile fluctuations that we should expect in the future. All the factors that play into it are not healthy.
Related: Crypto developers should work with the SEC to find common ground
If previous downward cycles bore the mark of things like the Initial Coin Offering (ICO) scams of 2017-18 or the Decentralized Autonomous Organization (DAO) hack of 2016, this one also has a story to tell. This time it’s because over-leverage is not good for you. Companies that have tried to go too far too fast have found themselves overstretched and now face a moment of judgment.
Many cryptocurrency projects are inclined to berate traditional finance in favor of a new way forward. This mentality should be applauded. Platforms including Celsius have introduced the prospect that lenders can earn high returns on loans without going through a bank as an intermediary. This idea is not going to and should not go away.
However, snubbing the old ways does not mean that crypto companies can defy the laws of gravity. Not assessing the risk of default and having a strategy in place for when it will happen—because it will happen at some point—does not count as innovation.
This principle far beyond decentralized finance (DeFi) applies to the entire crypto industry. When hundreds of crypto projects added “metaverses” and associated words to their messaging after Facebook was rebranded as Meta, serious business people realized that it was often just another marketing ploy by unserious non-fungible token (NFT) projects seeking to capitalize on the hype. Indeed, in January, OpenSea, the industry’s largest NFT marketplace, claimed that a whopping 80% of NFTs minted for free on its platform were fraud or spam.
Related: Bored Ape prices are down, but the NFT market is heading for new highs
At the start of the Wild West ICO, we could accept some degree of this kind of mania as a normal and early phase of new technology. But this cannot be the status quo in the future.
Exchanges like OpenSea don’t need to become like Robinhood to thrive, but they do need to use the same mechanisms that legitimate trading platforms use to prevent fraud from taking over. Again, the laws of gravity still apply to Metaverse, NFT projects and platforms that offer their tokens for trading.
This does not put the sole burden on exchanges or minimize what I and others have written about the projects themselves bearing the burden of responsible behavior. Having a real product is necessary before launching yet another aimless symbolic sale and a marketing campaign to accompany it.
Indeed, memecoins could still play a vital role in the industry. But projects that aren’t supposed to be the next Dogecoin shouldn’t use the marketing strategy of the Shiba Inus of the world. Some projects do it well, and they are the ones that have a serious chance of succeeding in the next bull run.
Another hurdle the industry has to overcome is the launch of crypto platforms only to allow investors to trade for other digital currencies. We have many like that. Projects that can find alternative ways to spend crypto will move the industry beyond speculation.
Of course, even these projects must anchor their innovative motivations in realistic business plans. When we start to see more of it, maybe the great crypto experience can finally overcome the fear of extinction every time a crash occurs.
The charges against Saylor, one of Bitcoin’s biggest proponents and an icon among crypto enthusiasts, in the midst of a bear market are a public relations nightmare. But crypto investors aren’t going anywhere. It’s time for projects that are better at creating products than marketing to take advantage.
Ariel Shapira is a father, entrepreneur, speaker and cyclist and is the founder and CEO of Social-Wisdom, a consulting agency working with Israeli startups and helping them connect to international markets.
This article is for general informational purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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