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What smart crypto investors can learn from Crypto.com

Analytics

protos.com 03 November 2022 18:51, UTC
  
Reading time: ~5 m

Six years after it launched, Crypto.com had confirmed its position alongside the likes of Binance, Coinbase, and FTX as a top 10 spot crypto exchange.

Its distinctive lion-head logo could be seen adorning some of the sporting world’s most iconic venues, and A-list Hollywood stars were appearing in its frankly preposterous Super Bowl ads.

Not to mention, its native Cronos token (CRO) was riding high (eager traders and investors snapped up about $26 million worth of Crypto.com’s original MCO Token in 2017, swapping it for the newly-renamed Cronos in 2020).

Life was pretty good.

Unfortunately, that’s the thing about crypto: it comes at you fast. And Crypto.com has discovered over the past 12 months that throwing money at glitzy PR gimmicks is no substitute for sound fundamentals when crypto winter hits.

With CRO continuing to hemorrhage value, employees leaving the company in droves, and the exchange seemingly running out of money, some are wondering if it will survive the winter.

Of course, it’s not alone in finding things pretty tough over the past year or so, with literally hundreds of tokens, crypto-based businesses, and exchanges struggling when the market plummeted. And, sadly, this means that even more traders and investors lost out when the projects, coins, and companies they placed their faith – and hard-earned cash – into went to the wall.

Now obviously, there’s no such thing as a sure thing when we’re talking crypto. However, there are certain things you can look out for to ensure that, if crypto winter does hit, your investment is best placed to ride it out.

So, here are just a few of the warning signs to look out for to make sure you don’t get stung by the next Crypto.com.

Poor-quality marketing

Much of the recent criticism leveled at Crypto.com surrounds the firm’s marketing, from how much it spent to the ridiculous claims it made.

And this can be a great indicator that not everything is 100% right with a project.

The company’s now-infamous Fortune Favors the Brave commercial was one of the few ads from a digital asset company to air during the Super Bowl. Unfortunately, when you look past the fact that it starred Matt Damon and clearly cost a fortune, it was just not very good. For a start, it equated buying crypto to 18th-century sea voyages and used the phrase “fortune favors the brave” when the famous saying is actually “fortune favors the bold.”

So, Crypto.com obviously had a lot of money but couldn’t produce a coherent script or relevant messaging.

Another thing to look out for is marketing spend. Or, in Crypto.com’s case, a significant cut in marketing spend.

Sure, there was the Super Bowl spot and the $700 million Lakers stadium sponsorship, but as things got rough, it started to back out of sponsorship deals and tone down its ad campaigns. It should be noted that a company scaling back marketing isn’t itself a huge issue — after all, bear markets do happen — but it has to be said that Crypto.com’s scaling back was noticeably severe.

A list of dodgy associates

When choosing where to invest your funds, it’s more than a little wise to check out precisely who the project and its team have associated or worked with.

Sure, this may sound a little snobbish but you know what they say: Lie down with a dog and you get fleas.

A brief delve into Crypto.com’s history shows that the company dropped the ball when it chose the infamous German fraud Wirecard to be its card issuer.

When irregularities in Wirecard’s figures were flagged during an audit in 2019, it was discovered that the company had ‘misplaced’ more than $2 billion.

Despite Crypto.com promising to refund card users who lost money when Wirecard became insolvent, rumors that the two firms shared an exec were more than a little unhelpful. And even though it was just a mix-up caused by two execs having similar last names, it turned out that the Crypto.com exec in question had previously been involved with a number of failed companies in Australia.

Employees jumping ship

Employees leaving a business – whether they’re pushed or they jump – is never a good sign. Again, if you want proof, look no further than Crypto.com.

The company once boasted more than 5,000 employees, however, this was at its 2021 peak. By June this year, it had reportedly slashed its workforce by 2,000 people.

Read more: Even Matt Damon couldn’t save 2,000 Crypto.com staff

A history of failed projects

It may sound simple but a good way to gauge a project’s potential success is to take a look at its track record. Any legal problems? Failed projects? All potential red flags.

The original team behind Crypto.com sold about $26 million worth of the platform’s native token (then called MCO) in 2017. MCO later became CRO and holders were allowed to swap to the new token following the company’s rebrand.

Like Celsius’ CEL token, CRO offered incentives to new users and increased yield to customers who locked it. It also offered loyalty and usage bonuses, including discounts on various services. These bonuses included debit cards with a CRO-based cashback system.

However, this system was only sustainable if people kept joining and locking CRO tokens. Once new sign-ups dried up, the company was forced to slash these rewards and the token’s price plummeted.

What about that screams solid planning?


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