The Binance crypto exchange founder, who became a multibillionaire at breakneck speed, called for a new sense of humility in the community and a renewed focus on—ahem—offering actual value following this week’s brutal selloff in digital currencies.
Known simply as CZ, he cautioned his followers the crypto space was still a new market where innovations like algorithmic stablecoins are being tested to see if they succeed or fail.
Many might be all the rage at one point only to enter a vicious circle and ultimately collapse.
“At the end of the day, we need to go back to fundamentals. Build real products, not reliant on short term incentives, or promotions, but with intrinsic value that people use,” he posted to Twitter.
Crypto market crumbling
This past week, the crypto market has been rocked by the algorithmic stablecoin Terra, which saw its value collapse on Wednesday after investors lost all confidence it could maintain its peg to the dollar.
Some suspected the sustained pressure may have come from an external attack by malevolent actors in the rival world of centralized finance.
Terra was designed to trade at a one-to-one ratio to the dollar, not with some form of actual collateral that should underpin its value as is the case with Tether, but through an algorithmic process of creating and then destroying its very own supply of coin.
Despite the stable peg, however, it had marketed itself with the promise of a 20% annual return thanks to its controversial Anchor protocol that led some critics to compare it to a Ponzi scheme, while backers said it was merely an advertising tool to drive acceptance.
The two-year bull run in cryptocurrencies has seen the rise of not one but two canine-based meme coins, Shiba Inu and Dogecoin—the latter famously developed as a joke—owing largely to coordinated buying via social media communities like the “SHIBArmy.”
The fact that these digital currencies are backed by nothing but the mutual support of their fans and none serve as legal tender—apart from Bitcoin in El Salvador—has often bewildered traditional market investors, mocked as “normies” by crypto fans.
‘Cryptocurrencies don’t need more value than an empty box’
Some key actors in the market have also raised controversy, such as FTX crypto exchange founder Sam Bankman-Fried, who goes by “SBF.”
Late last month the 30-year-old stunned Bloomberg interviewers after candidly admitting cryptocurrencies don’t need any more value than an empty box so long as people keep putting more money into them, believing they must be worth something.
Days later he was entertaining celebrities like Bill Clinton, Tony Blair and star quarterback Tom Brady at his very own crypto conference in the Bahamas.
Don’t be ‘cocky’
Molly White, creator of a website that tracks scams, rug pulls, and other scandals, told the Harvard Business Review on Wednesday that she started to worry about the crypto economy late last year once the community tried to convince people everyone would need a digital wallet and embrace the blockchain in the future.
“It was previously a somewhat niche technology, even to software engineers, and it seemed like the majority of people who engaged with it financially were fairly aware of the volatility risks. Those of us who didn’t want anything to do with crypto could just not put any money in it,” she said.
“Once crypto began to be marketed as something that everyone would need to engage with, and once projects began trying to bring in broader, more mainstream audiences—often people who didn’t seem to understand the technology or the financial risks—I got very concerned.”
Many argue the moment crypto broke through into the mainstream was during the Super Bowl, when star actors like Matt Damon and Larry David tried to sell Americans on the idea of buying digital currency through ads for Crypto.com and FTX.
After this week’s meltdown in Terra and its related Luna coin, Binance’s CZ told his followers a different, more modest attitude would do the community well.
“More than anything else, we need to humbly respect the market, and not be cocky. Build step by step, day after day,” he wrote.