Crypto Wants Its Shine Back
At a cryptocurrency conference in Denver this month, a group of singers dressed in bright orange took the stage to perform what an industry website later described as an anthem for the crypto faithful, a “blockchain” Blowin’ in the Wind.”
The chorus was a list of crypto’s most infamous villains, from trash-talking entrepreneur Do Kwon to disgraced FTX founder Sam Bankman-Fried, punctuated by four-letter expletives.
“In the next bull market, we promise not to use,” continued the song, “a centralized exchange run by these toxic dudes.”
After a disastrous 2022, when a procession of major crypto firms imploded, the industry is ready for an audacious rebrand. Executives like Mr. Kwon and Mr. Bankman-Fried — once beloved crypto celebrities whose every tweet had hundreds of thousands of devotees hanging on to them — are now personas. Their former fans argue that these crypto villains never really embodied the core values of the industry, even before the collapse of their companies.
At the remaining firms, top executives are looking for new ways to market products that many consumers now distrust — and to distance From former colleagues and mentors who could face years in prison. Some companies are trying to capitalize on the growing interest around artificial intelligence, with crypto schemes that feature complex AI tie-ins. Others are looking to replace the word “crypto,” arguing that the original nomenclature of the industry has become incredibly tainted.
Even before the failure of Mr. Bankman-Fried’s exchange in November, crypto companies were “making slow moves toward changing the narrative,” said Todd Irwin, chief strategy officer at Fazer, a branding agency with clients in the industry. “After the FTX incident, this move has been turbocharged.”
The cleanup effort is a familiar routine in an industry that has experienced repeated booms and busts over its short history. Bitcoin’s early advocates had to convince the public and regulators that the cryptocurrency was much more than a convenient tool for drug dealers. A major crypto boom in 2017 was followed by a long period of law enforcement scrutiny, as exciting-looking start-ups were exposed as scams.
What to know about the fallout of FTX
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What is FTX? FTX is now a bankrupt company which was one of the largest cryptocurrency exchanges in the world. This enabled customers to trade digital currencies for other digital currencies or traditional money; It also had an original cryptocurrency known as FTT. Based in the Bahamas, the company built its business on risky trading options that are not legal in the United States.
Who is Sam Bankman-Fried? He is the 30 year old founder of FTX and former CEO of FTX. Once the golden boy of the crypto industry, he was a major donor to the Democratic Party and is known for his commitment to effective altruism, a charitable movement that urges followers to give away their money in efficient and logical ways.
How did FTX’s troubles begin? Last year, the chief executive of Binance, the world’s largest crypto exchange, Changpeng Zhao sold his stake in FTX back to Mr. Bankman-Fried, receiving a number of FTT tokens in return. In November, Mr. Zhao said he would be selling the tokens and expressed concerns about the financial stability of FTX. This move, which brought down the price of FTT, spooked investors.
What Caused the Downfall of FTX? Mr. Zhao’s announcement sent the price lower and spooked investors. Traders rushed to exit FTX, leaving the company with an $8 billion shortfall. Binance, FTX’s main rival, offered a loan to rescue the company, but later pulled it out, forcing FTX to file for bankruptcy on November 11.
So far, the latest round of soul-searching has done little to change the fortunes of the industry. Since the demise of FTX, US regulators have announced fines and other enforcement actions against several major crypto companies. The sudden failures of two trusted banking partners, Silvergate Capital and Signature Bank, have dealt a new blow to crypto start-ups, making it difficult to conduct basic business operations in the United States.
And the industry is still struggling to demonstrate the practical value of its technology to an increasingly skeptical public.
“Rebranding doesn’t solve the fundamental problem,” said Lee Reiners, a one-time supervisor at the Federal Reserve Bank of New York who now teaches at Duke Law School. “What is it good for? What problem does it solve? It is just PR”
A year ago, the crypto industry was flooded with cash. In April at his compound in the Bahamas, Mr. Bankman-Fried hosted a week-long convention where attendees sipped champagne and partyed on beaches. Among the guests: Su Zhu, founder of crypto hedge fund Three Arrows Capital, which failed weeks later when a market crash sent all major cryptocurrencies into free fall.
Now Mr. Bankman-Fried is facing charges over his management of FTX, which means he could face decades in prison if convicted, and industry executives are still navigating the fallout. Are.
Steven Saxton got on call with a bank this year to discuss his crypto start-up, Gorilla Labs, which plans to offer a stablecoin, a type of cryptocurrency designed to maintain a value of $1. is designed for.
“My CTO said crypto about five times during the conversation. I was like, ‘Just say ‘blockchain,’” Mr. Saxton said. “These people can be very sensitive to that, and it can bother them a lot. “
But even “blockchain” — the term for the publicly viewable ledger where crypto transactions are recorded — has potentially negative connotations. In January, crypto mining company Riot Blockchain changed its name to Riot Platforms. Other companies have dropped the word “crypto” from their marketing materials, turning to vague terms like “decentralization.”
“She’s wearing a different outfit to the same party,” Mr Irwin, a branding expert, said.
The marketing push extends to the world of artificial intelligence, which has replaced crypto as the hot trend in Silicon Valley following the release of viral chatbot ChatGPT. A range of AI-themed cryptocurrencies have risen in value, and crypto firms with names like DogAI and CryptoGPT are trying to incorporate the buzzy technology into their offerings.
No crypto company is under more pressure than giant exchange Binance, which is facing government scrutiny on multiple fronts, as well as growing concerns about its financial stability and lack of cooperation with regulators. This month, Changpeng Zhao, chief executive of the exchange, Have been taken To add Binance to a more lucrative trend. He unveiled Bicasso, a product that uses AI technology to create artwork in the form of non-fungible tokens, digital collectibles known as NFTs.
“You can turn your creative vision into NFTs with AI,” Mr. Zhao wrote on Twitter. “Try it and show me what you make with it.”
After the Fall of FTX
The spectacular collapse of crypto exchanges in November stunned the industry.
- Jane Street Capital: The collapse of FTX has drawn attention to the little-known Wall Street firm where Sam Bankman-Fried began his career. He was drawn there because of his interest in “effective altruism”.
- Gaming Market?: Since FTX broke out, Mr Bankman-Fried denied allegations that he manipulated the markets to benefit his companies. Cryptocurrency investors disagree.
- Bail Conditions: A federal judge overseeing Mr Bankman-Fried’s case has indicated a willingness to jail the disgraced executive for a frequent test of the limits of his imprisonment.
- Legal advice: A judge allowed law firm Sullivan & Cromwell to continue advising FTX on the bankruptcy after critics complained of a potential conflict of interest between the firm and the exchange.
In recent months, he and other industry figures have also posted videos on social media designed to differentiate themselves from erstwhile crypto heroes like Mr. Bankman-Fried.
“Respect is not given,” Mr. Zhao seriously announced in a post. “It’s earned.” in another widely shared videoJesse Powell, the founder of the Kraken crypto exchange, took some strange jabs at the punching bag labeled “corruption” and “shady players.”
A similar distancing effort got underway in March at ETH Denver, a conference for advocates of the popular crypto platform Ethereum. In the bathroom, guests had the option of using toilet paper bearing a Che Guevara-style image of Mr. Bankman-Fried. At the opening ceremony, Jonathan Mann, a songwriter who specializes in crypto-themed songs, performed a heavy-handed song denouncing the crypto villains of 2022.
“All this toxicity and bad vibes and feelings of 2022 should have come to an end,” Mann said in an interview. “I had everyone do breathing exercises first: ‘Close your eyes. Deep breath in, deep breath out. We’re going to cleanse ourselves.’”
Even in 2023, a crypto conference could still attract high-powered guests. While Mr. Mann and four other singers performed, Colorado Governor Jared Polis watched from the sidelines. “He had a smile on his face,” Mr. Mann said. (A spokeswoman for the governor, Melissa Dvorkin, said she “would not misinterpret his inquisitive demeanor as an endorsement of the words used.”)
For some crypto executives, ritualistic cleansing isn’t enough. Some start-ups have abandoned crypto entirely in favor of different types of technology.
In late 2021, Troy Osinoff co-founded Zarp, hoping to simplify complex crypto investing for mainstream consumers. Zarp raised $5 million, built a waiting list of 120,000 people and was preparing to launch last summer, when the collapse of Luna, a popular cryptocurrency, sparked a broader market meltdown.
The fallout hurt many of Zerp’s competitors, and Mr. Osinoff decided to halt the rollout because he was concerned that crypto markets were not safe places to park customer funds.
Zarp soon shifted to a more traditional form of financial technology. The company started developing a credit card that offers features tailored to Generation Z and plans to introduce the same in the coming months. Mr. Osinoff said he still hoped to see crypto features included in Zerp’s offering, but only once sentiment improved.
“It’s already a barrier to getting people interested in crypto,” he said. “We are waiting for it to return to normal.”
Susan C. Beachy contributed research.