In light of the largest financial fraud since 2008 (the FTX takedown), we’re shining a light on how the cryptosphere tends to celebrate the big personalities behind a project more so than the actual solutions the projects represent. The FTX demise isn’t the first or only example of this.
Impressive Twitter followings and having large amounts of money should not equate to “investment potential” and it’s time the crypto community learned this.
Time and time again we see these outspoken (and more often than not, cocky) leaders build a following, leverage this into revenue for their business, only for things to unravel dizzyingly out of control, usually at the expense of the investors and not the cocky leader. Rarely the cocky leaders.
Recognize The Action
In order to change our behavioral patterns, we need to first recognize them. Alongside doing your own research before investing in a platform, take a long hard look at the leadership and determine for yourself whether this person is making splashes and deliberately positioning themselves in the spotlight, or whether their focus is on building a strong business that provides an important solution to the space around.
Let’s look to Sam Bankman-Fried (Founder of FTX) as an example. Bankman-Fried, with his 1 million Twitter followers, spent a lot of time working with regulators and lobbying with politicians, although as it turns out it was all a show with little to no intention behind it. In an interview following the exchange’s demise, the disgraced CEO tells Vox writer Kelsey Piper it was “just PR.”
While there is no hard and fast rule about matching a leader’s age, experience or talent to success, there has been a significant trend over the past year with project leaders displaying overly arrogant behavior on social media, only to later realize they were shouting (tweeting) these from the rooftops of their intricately built house of cards.
When looking to distinguish the Vitalik Buterins from the Do Kwons, look at their behavior on Twitter. Are they tweeting overly confident stats about their project, or are they communicating in a simple and humble manner?
Examples of Fallen Heroes
There’s no denying that the crypto market has seen some frosty months of trading, and while we can’t blame this entirely on the demise of several platforms, they have certainly played their role. There’s no faster way to slow adoption and choke investor trust than the breakdown of a high-functioning top 10 crypto platform.
Below we take a look at the personalities behind three of the biggest crypto crashes this year.
Do Kwon - +1 million followers
Founder of TerraLabs, Do Kwon has over 1 million followers and was very active on Twitter, even sending out some rather arrogant rants on Twitter just days before the crash. The crash we refer to is a loss of reportedly $58 billion as Terra (LUNA) and TerraUSD (UST) derailed in May 2022.
Following the crash, a warrant for his arrest was issued in South Korea and a Red Notice was issued by Interpol. While insisting he is “not on the run”, Do Kwon is yet to come forward.
Su Zhu - 580K followers
Shortly after the demise of Terra, hedge fund Three Arrows Capital (also known as 3AC) unraveled leaving a $3.5 billion loss in its wake. Earning his status as a “prolific personality” within the crypto community during the 2021 bull run, things came crashing down for co-founder Su Zhu rather quickly once it became known that 3AC had taken out billions of dollars in uncollateralized loans from some of crypto’s biggest whales.
As it turns out, behind the persona was a risky trading strategy and questionable business decisions. Still, his almost 600,000 Twitter followers couldn’t get enough of him.
Sam Bankman-Fried - +1 million followers
As touched on above, Bankman-Fried went from the “Robinhood” or crypto with great ideas and innovative solutions to a deceitful and disgraced former crypto leader. Since the platform crashed it has come to light that Bankman-Fried was running several companies that became an entangled mess of insider trading info, zero accounting practices, and misused consumer funds. These losses are believed to be in the region of $10 billion.
Take The Lesson And Run
Alongside Alex Mashinsky (former CEO of Celsius), these men have all been awarded villain status in the industry. While there are some die-hard fans that continue to follow them, the general consensus is that they made selfish decisions that resulted in losses for millions.
While we tend to idolize success, let this be a lesson to really take a step back and consider the character, their experience, and their contribution to the industry before blindly trusting that their intentions are for the greater good. This cult-like worship of leaders needs to stop.
Focus On Vetted Projects
Instead of following projects based on their outspoken leadership, look to follow projects that have met their roadmap milestones, ones that have followed through on promises, ones that brought a unique solution to the blockchain ecosystem.
Look to projects with strong leadership, strong in the sense of expertise and innovation not in terms of strong opinions. Look to trusted projects that have changed the landscape of the crypto and greater financial landscapes.
Look to projects with strong utility. Does the coin serve a particular function? Is it useful beyond just its immediate ecosystem? Does it solve a problem in the blockchain community at present?
Look to projects like Decentraland where MANA fuels all transactions that take place in its metaverse, or Ethereum, where ETH is used to facilitate thousands of dapps and ERC-20 coins.
Or the original cryptocurrency, Bitcoin, the most widely accepted digital currency in the world, even Oobit, where OBT facilitates instant transactions for zero fees. Look for projects with good reputations, strong leadership, palpable utility, and inclusive communities.
Building a diversified portfolio is important, moreso is the quality of each coin within the portfolio. Ensure that you have fully vetted each project and have invested based on the project’s merit and not just the outspoken, entertaining leader.
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