About time there was a bit of controversy in the cryptocurrency world, huh?
Crypto.com, the industry behemoth that boasts over ten million users and four thousand employees, has found itself at the centre of a storm of criticism this week, as it decided to slash the rewards on its popular VISA cards.
The blog post dropped Sunday evening and immediately caused uproar.
What is Happening?
Card rewards were cut down pretty drastically. Lower tiered users (Midnight Blue and Ruby Steel) get 0%, while the next ones up recoup only 0.5%. Even the top tier (Obsidian) were cut to just 2%. There will also be a monthly cap on awards to lower tiers at $25 to $50.
Oh, it gets worse. Staking awards were also reigned in. Once the 180-day period for all those who staked before the announcement date (May 1st) completes, all staking awards will cease, except for the lowest two tiers. This is very significant, as before Sunday, the higher tiers had staking awards well north of 8%.
Reaction
I have noticed in my time on this planet that when you promise people something and then take it away, they usually become angry. Even more so when it is their money. Crypto.com have found this out, as the unexpected announcement has gone down like a lead balloon.
I jumped on Reddit, where the sentiment was…not good. “So they want to be more profitable, let’s see if they make money with less customers. I mean way less customers”, user KakaratoCryptoniano wrote.
User Mac-Hacker’s comment, “Only 20 more days (until my 180-day lock-up is over) and I’ll be liquidating my CRO stake. Good riddance”, summed up the feelings of many. Indeed, the markets reacted in accordance with this line of thinking, as Cronos dumped from $35c at the time of announcement to $26c. It is currently trading at $28c, still down nearly 15% from the time of announcement.
180 Turn
The above comments were only the tip of the iceberg. CEO Kris Marzalek jumped on Twitter to announce a more measured adjustment to the staking rewards, 8% for the higher tiers and 4% for the lower-tiered users.
Instead of eliminating card staking earn rates completely, we will offer a more balanced approach: 8% APY for Private Members (Obsidian, Icy White, and Frosted Rose Gold) 4% APY for Royal Indigo and Jade Green card holders
— Kris | Crypto.com (@kris) May 3, 2022
Cashback rates remain slashed, however. And the announcement, while a positive one, didn’t quell the anger around the community, many of whom had unstaked following the first announcement. The tweets did spur the slight uptick in the token mentioned above.
Why?
Crypto.com knew the reaction here would be visceral. And while their approach to revealing the news – a sudden announcement, alongside a lack of transparency to date – their hands may have been tied.
It’s a tale as old as time, but this is still a fintech startup, launching only in 2015, and it has seemingly expanded beyond its capabilities, necessitating this reigning in. To be clear, I think the company’s handling of this could not have been worse, but the real problems are the bloated spending to date.
The marketing spend has been jaw-dropping. The crypto.com brand is plastered all over F1 tracks, via a reported $100 million deal last summer. In addition to that deal, this week’s Grand Prix is officially named the Crypto.com Miami Grand Prix, while at the Belgian Grand Prix in August, they will be the official NFT partner. They also have a deal with a team in the sport – Aston Martin. Figures for these agreements were not publicised, but you don’t need much research to know that they are expensive.
It goes beyond fast cars, too. They are the official sponsor of the FIFA World Cup in Qatar this winter, which is the biggest sporting event on the planet. They also struck a $700 million deal with the Los Angeles Lakers to rename the iconic Staples Centre the Crypto.com Arena – the most valuable naming rights deal in history.
I could go on, but I think you get the point.
Downturn
The crypto market, alongside the stock market, has tumbled this year. Geopolitical uncertainty, rampant inflation and the Fed’s hawkish turn have all served to give the S&P 500 its worst start to a year since 1939, and cryptocurrencies have, as one would expect, been even more volatile. Cronos is now down 70% from its all-time high set last November – the same month the Staples Centre sponsorship deal was struck.
The incredible breadth of the marketing spend is obviously draining resources, and the company have found it impossible to sustain this as part of its business model. Hence, it has decided to cut back on rewards.
Future
In digging deeper, the fixed supply of Cronos means the awards could never continue at the rate they were being paid out at. The entire card offerings and the accompanying awards, in isolation, were a loss-maker. A commonly used strategy by startups around the globe, designed to entice people into joining the app, where customers could then be monetised through other streams.
But the swiftness at which these awards have ceased is a shock. So too is how suddenly they were announced. There was no roadmap, no guidance to customers, and no warning for what may come down the line.
And while the token has slumped 15%, this remains one of the biggest crypto entities on the planet. As much as it may annoy hardcore fans, Crypto.com has built up a boisterous brand, albeit with too aggressive a budget, as well as an extensive range of products and an excellent app. They should be able to weather the current storm on the back of that, and if/when the markets do turn upwards again, they will be well placed to rebound.
It still doesn’t excuse the manner in which they cut these rewards, however, which was about the worst thing to come out of the company since their cringe SuperBowl advert, featuring Matt Damon.
Crypto.com users, I feel your pain.
The post Crypto.com community in uproar over slashed rewards appeared first on The Home of Altcoins: All About Crypto, Bitcoin & Altcoins | Cointext.com.
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Author: Dan Ashmore
