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Michael Saylor Has Been Demolished, But Bitcoin Investors Don’t Have To Panic

As cryptocurrency investors know, the market moves in cycles. We had the up cycle when Bitcoin (BTC) and Ether (ETH) hit their all-time highs, and now the bears are back in town.

One of them ripped apart MicroStrategy founder and executive chairman Michael Saylor this week. In this case, it was a very powerful bear — Washington, DC Attorney General Karl Racine — who sued the Bitcoin evangelist for allegedly owed $25 million in unpaid taxes. MicroStrategy’s stock price is down more than 13% on the news, from $251 on Aug. 29 to less than $220 on Sept. 1.

Still, now is not the time for investors to panic. It’s been about three months since the now infamous crash of the Terraform ecosystem — which ended the greatest bullfight known to mankind — and the sky still isn’t falling. The world will not end and blockchain is as immutable as ever.

Does this mean that industry leaders should no longer view the market downturn as existential threats to cryptocurrency as a business? Perhaps not, as the $2 trillion worth was erased from the cryptocurrency market cap after the Terraform collapse. Such extreme market events cannot be dismissed as volatile swings that we should expect in the future. Not all factors involved are healthy.

Related: Crypto Developers Need To Work With The SEC To Find Common Ground

If the previous downcycles bore the mark of things like the initial coin offering (ICO) scam of 2017-18 or the decentralized autonomous organization (DAO) hack of 2016, this one also has a story to tell. This time it is that relying too much on leverage is not good for you. Companies that tried to go too far too quickly became overburdened and now face a moment of reckoning.

Many cryptocurrency projects tend to scold traditional finance in favor of a new way forward. That mentality is to be applauded. Platforms, including Celsius, introduced the prospect that lenders can earn high yields on loans without going through a bank as an intermediary. That idea will not and must not disappear.

Nevertheless, ignoring the old ways does not mean that crypto companies can defy the laws of gravity. Not estimating the risk of default and not having a strategy for when that will happen because it will happen at some point does not count as innovation.

That principle goes far beyond decentralized finance (DeFi) and applies to the entire crypto industry. When hundreds of crypto projects added “metaverse” and related words to their posts after Facebook was renamed Meta, serious business people understood that it was often another marketing ploy by non-serious non-fungible token (NFT) projects looking to capitalize on the hype. Indeed, in January, OpenSea, the industry’s largest NFT marketplace, claimed that as much as 80% of the free NFTs on its platform were fraud or spam.

Related: Bored Ape prices have fallen, but the NFT market is heading for new heights

In the early days of the ICO Wild West, we could accept a degree of this kind of mania as a normal, early stage of new technology. But that cannot be the status quo in the future.

Exchanges like OpenSea don’t have to become like Robinhood to thrive, but they must use the same mechanisms that legitimate trading platforms use to prevent fraud from taking over. Again, the laws of gravity still apply to the Metaverse, NFT projects and platforms offering their tokens for trading.

Statistics of OpenSea users, volume and transactions. Source: DappRadar

That doesn’t put the sole burden on exchanges or minimize what I and others have written about projects that themselves bear the burden of responsible behavior. Having a real product is necessary before launching another symbolic sale without a target and a marketing campaign to go with it.

Indeed, memecoins can still play a vital role in the industry. But projects that are not intended to be the next Dogecoin should not use the marketing strategy of the world’s Shiba Inus. Some projects do this well, and they are the ones that have a serious chance of succeeding in the next bull run.

Another hurdle the industry has to overcome is crypto platforms launched purely to allow investors to trade other digital currencies. We have enough as it is. Projects that can find other ways to spend crypto will push the industry beyond speculation.

Of course, these projects must also anchor their innovation drive in realistic business plans. When we start to see more of that, the great crypto experiment may finally outgrow the fear of extinction every time a crash hits.

The allegations against Saylor, one of Bitcoin’s biggest supporters and an icon among crypto enthusiasts, amid a bear market are a PR nightmare. But crypto investors aren’t going anywhere. It’s time for the projects that are better at product development than marketing to take advantage of that.

Ariel Shapira is a father, entrepreneur, speaker and cyclist and is the founder and CEO of Social-Wisdom, a consultancy that works with Israeli startups and helps them connect with international markets.

This article is for general information purposes only and is not intended and should not be construed as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author only and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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