The crypto industry is facing an existential crisis. PR will now become more important than ever.
Controversies and crises are not new to the crypto industry. If we look back at the last three years, there has been no shortage of incidents around crypto crashes, hacks and scandals that have blighted the blockchain space. But 2022 has been a particularly challenging year for crypto. Arguably, 2022 might just be crypto’s most disruptive year since becoming mainstream and entering the public consciousness.
More than ever before, external events have greatly impacted the crypto sector even as it braves a prolonged bear market. For one, the economy has been in a tailspin since the pandemic, further compounded by Russia’s invasion of Ukraine. As we entered a global recession, central banks naturally raised interest rates to curb inflation while governments tightened monetary and fiscal policies. All of these circumstances have pushed investors to sell speculative assets or exit them altogether. Since crypto is considered an emerging asset class in a volatile market, investors have less appetite to take on the risk as they did previously.
All of the above led to an unprecedented exodus of traders from crypto markets which massively contributed to the collapse of stablecoin Terra – the crypto currency that powered the decentralised network of the same name, and its sister coin, Luna. The fall of Terra was a tectonic earthquake that rocked confidence in the crypto market and shook it to its core foundations. But despite this, the crypto market still managed to trudge along, albeit not in the best shape.
But it was the implosion of FTX in the penultimate month of 2022 that has plunged crypto into a full-blown existential crisis. Arguably one of the biggest crypto exchanges before its collapse, FTX’s spectacular fall from grace has sent shockwaves through the DeFi market which will be felt in 2023 and possibly beyond.
Reputation management has become just as critical an issue as regulation for the crypto industry
Calls to introduce government-sanctioned regulation to the DeFi space has been an ongoing discussion for a number of years now. With the collapse of Terra and FTX, regulation of the crypto industry has now become a matter of when and not if.
With trust in the crypto space at an all time low, reputation management has suddenly become a major priority for crypto brands. The fallout of Terra and the subsequent events that have followed, has caused severe reputational damage to crypto companies and the wider DeFi space. The fact that one of crypto’s biggest exchanges crashed so spectacularly the way it did, has plunged the entire sector into an unprecedented existential crisis.
Going into 2023, crypto brands will need to double down on how they manage their reputation in the context of the recent FTX crash. Even if a crypto brand is far removed from FTX, the fact that it operates within the DeFi space means that its communications needs to be very specific now, with the sole aim of damage control and reinforcing trust among jaded investors.
Shouting about how great a brand is will no longer cut the mustard when it comes to reputation management. Crypto brands need to be constantly communicating the value of their asset or service. More than ever before, crypto companies need to be entirely transparent with their customers and stakeholders like it is a necessity for their survival. Gone are the days of crypto companies burying their heads in the sands during times of crisis as silence can now be viewed as a sign of uncertainty or, even worse, untrustworthiness.
On the issue of regulation, crypto brands need to be communicating their stance on it, whatever that may be. The crypto industry has come to a place where regulation is on the horizon and crypto companies who can articulate their stance on regulation will give consumers and stakeholders a sense of ease. Crypto brands can no longer remain silent on the big topics of discussions in their industry, especially on issues around transparency and security.
2022 has been a difficult period for the crypto space and now the credibility of DeFi is being scrutinised more than ever. Within this context, crypto brands have to be thinking very carefully about their communications strategy which must be centred around instilling trust again among weary investors.
PR will be an effective tool for crypto brands to express their opinions on the issues of security and transparency through credible channels. As the global economy continues to reckon with a cost-of-living crisis caused by this recession, it is unlikely that 2023 will be a much smoother year for the crypto space. To help weather this unprecedented storm, crypto brands cannot be mere spectators but they must be commentators and communicators to restore trust.