Crypto Can’t Afford Another Communication Crisis
Being able to effectively communicate during a crisis can make or break a project, no matter the circumstances
Anton Vierietin/Shutterstock modified by Blockworks
| This is part two of our three part series on communication in cryptocurrency, touching on what Web3 does well — and what Web3 does not so well — in communicating its messages to the wider world. You can find part one on Web3 language barriers here, and part three on crypto’s cultural foundations here. |
It’s time we learned our lesson: Without effective communication, a crypto project will struggle to gain the trust of the market.
Earlier this year, Silicon Valley Bank collapsed as a direct result of a breakdown in communication. This led to the biggest US banking crisis since 2008, which expanded even to crypto, causing Circle’s stablecoin to temporarily depeg.
We had already been taught a valuable lesson last year by FTX’s Sam Bankman-Fried on how not to communicate during a crisis. It took a short Twitter exchange between Bankman-Fried and Binance’s CZ to spark uncertainty around the internal health of the FTX balance sheet, which eventually snowballed into the collapse of the FTX empire.
Trust is an invaluable asset — a founder’s ability to communicate effectively during a crisis can either make or break a project in the face of adverse market conditions.
Crypto cannot afford another communication breakdown that might set off any more bank runs.
Communication matters
When fear, uncertainty and doubt ripple through crypto markets, many look to founders for reassurance.
Without proactive, strategic communication, uncertainty in the market may then translate into uncertainty in a project.
Because without being clear and transparent about internal happenings, customers are only going to want to know one thing when crises arise: Where is my money? And financial institutions often mistakenly defer to discussing numbers first before considering the delivery and tone of the message.
In SVB’s case, their March 8 press release regarding their new capital raise omitted the reason for needing to raise capital. It spat out numbers and offered no real insight into the business’s well-being. Had the bank been more transparent and offered more clarity, we may not have seen the biggest financial crisis since 2008.
In Web3, the survival of a project depends just the same on the community’s perception of what is important. Projects should consider giving their stakeholders a fuller picture of the story that reassures and highlights how they’re going to move forward, regardless of whose fault the crisis is.
Web3 means that the community has a stake and can vote for and against certain decisions in projects. This influence over a project’s success means that proactively keeping the community in the loop is necessary.
A crisis communication plan is a risk management plan
Having a crisis communication plan is the non-tangible layer of security that projects don’t realize they need until something goes awry.
The Euler Finance hack back in March was the biggest crypto hack yet in 2023. With over $200 million taken, the flash loan attack left users desperate for answers. But when news of the hack broke, Euler didn’t have a clear crisis comms plan.
In an initial tweet, the project alerted its users that a hack had happened — but their message lacked clarity. Euler missed sharing precautionary instructions with users as well as highlighting what this hack meant for their funds. Their follow-up included more information on what went wrong — but again failed to address the community’s worries and did not detail plans to make users whole.
Euler Finance has since successfully recovered the funds, which is great (if unexpected) news. But even the recovery statement — which told the community about the pretty darn positive update that all $200 million had been returned — lacked an empathetic tone of voice or any insight into how the protocol would move forward from this situation. It was to the point and direct, which was certainly practical, but it could have represented its community spirit, ethos and values better.
If leaders and projects in crypto want to survive and thrive in this volatile market, having an effective communications plan and strategy should already be a priority. We’re long past the days when the crypto industry was small enough where a foot-in-mouth tweet could just be laughed off or forgotten due to short memories — crisis communication matters, and poor communication, even if unintended, can no longer be excused. The tools are at your fingertips — use them.
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