What Twitter Meme Wars Say About Crypto's Reliance on Figureheads

Would you get a tattoo of your employer’s logo?

Gareth Li, head of business development and partnerships at Binance X, had the crypto exchange's angular diamond etched on his arm to match founder Changpeng “CZ” Zhao's ink. And a similar level of commitment extends to the charismatic CZ’s fans, who get their own Binance tattoos, sometimes permanently.

Cryptocurrency has strayed from its roots in the decade since a mysterious programmer (whose identity remains unknown, and to most users unimportant) invented a new form of anonymous digital cash. Today, cults of personality and public histrionics define the sector. And the stakes are often higher than getting inked like an idol.

Industry dynamics are “getting very personal,” as one Chinese investor, who did not want to be identified, put it.

CMT Digital’s head of trading, Brad Koeppen, agreed. Cryptocurrency markets are almost uniquely vulnerable to gossip and sentiment swings, he said. The correlation between public personas and trading activity isn't always apparent from public exchange data, especially for tokens with identifiable figureheads like Binance’s BNB (CZ) and Tron’s TRX (founder Justin Sun), Koeppen said.

"It's a little bit more relationship-driven at this point" than traditional markets, he said. “That has to do with the number of entities that are involved.”

Meme wars spawned last month over media coverage of Binance’s operations in China offered a salient example of celebrity token politics.

When news outlet The Block published an article on Nov. 21 with an unnamed witness claiming Chinese police conducted a “raid” on Binance’s Shanghai office, the Twitter feud escalated to near-nuclear proportions. The price of BNB also continued a downward slide from roughly $17 to below $15 the next day.

Social media chatter routinely sways crypto price movements. For example, in July the news of TRX creator Justin Sun’s thwarted Warren Buffett lunch also influenced market activity, Koeppen said. He described this as a widespread issue faced by cryptocurrencies with prominent founders.

"It's hard to know when Joe Lubin or Vitalik Buterin will say something, or when Justin Sun will get in trouble. The market reacts quickly," he said.

These cults of personality harness fans and followers to influence the market by defining the public narrative. And the entrepreneurs themselves encourage grassroots marketing by using retail investors as foot soldiers. In seemingly rare circumstances, some founders even offer monetary rewards.

Meet Tommy Mustache

The day The Block published its “raid” report, Binance’s Zhao tweeted that he would devote 100 bitcoin to an anti-FUD fund. FUD, or “fear, uncertainty and doubt,” is the rallying cry of crypto fans aggrieved by anything that doesn’t sing the praises of their favored token. Sun, who is now also a Poloniex investor, tweeted that he would personally donate 100 bitcoin to Zhao’s “FUD fighting fund.”

Beyond the anti-FUD fund, Sun also announced that he was sending $1,000 worth of USDT to a self-taught trader now living in Silicon Valley, known on Twitter as “Tommy Mustache,” to help him make derogatory memes shaming The Block’s staff for failing to apologize for a sensationalist article. (Mustache confirmed to CoinDesk that he received Sun’s payment.)

As a passionate holder of both BNB and TRX, Mustache said several people in his Telegram groups sold their BNB after The Block report because they feared Zhao may be arrested or otherwise penalized.

“Investors like me are getting hurt [by rumors] and we are sick of it,” Mustache said.

To be clear, so far little evidence suggests there was a police “raid,” and that phrasing was later changed by The Block to “visit.” There does, however, appear to be ongoing changes related to how and where China-based Binance staffers operate. Even if Chinese authorities are taking a close look at various offices affiliated with the exchange, that doesn’t imply any such visit would be disciplinary.

Still, Zhao later denied the existence of any Binance office in Shanghai since 2017, which strained credulity given the fact that employees were working in that area. When asked if he believes Zhao and Sun’s personal reputations give the tokens he owns their value, Mustache said that was “above his pay grade” and declined to comment on whether he would sell if anything happened to Zhao personally.

Regardless, Zhao’s rivals and former coworkers at the Asian OKEx exchange promoted this headline feud while spreading other accusations of dishonesty and unethical behavior by Zhao personally. (In Chinese social media groups, sexist criticism of Binance co-founder and fellow OKEx alum He Yi took a dark turn that has, fortunately, not made its way to Crypto Twitter.)

In short, Mustache worried negative headlines and Twitter feuds were impacting the value of his holdings.

That’s why he’s using the money from Sun to pay a graphic designer in Romania who makes reporter-bashing memes, in addition to thousands of dollars from Mustache’s own money. The funds are distributed to followers who share memes or contribute their own, following the giveaway format Sun often uses for the TRX community.

Mustache, who said he never received money from either founder before this incident, met Zhao in person over Thanksgiving weekend. Zhao likened their burgeoning bromance to a first date as the BNB holders’ meme-making crusade raged on. On Dec. 2, Mustache retweeted a call to “protect our investments” by discrediting FUD. (Binance denied contributing any money to this meme war.)

FUD according to whom?

As this case illustrates, what qualifies as FUD is generally defined by crypto celebrities.

In many cases, bombastic tweets and public announcements from token founders appear to surf the gray area between misrepresentation and optimism.

“This space is so young and immature, compared to what the business norms are,” said attorney Nelson Rosario, who specializes in legal issues related to cryptocurrency at the Chicago-based firm Smolinski Rosario Law. “People are still trying to figure out the killer use cases. So best practices are being developed on the fly.”

Compare the latest Binance examples to when Sun tweeted in October that an upcoming partnership would expose TRX to “billions of customers.” The reality was made clear later that week: A small technical update meant Samsung devices could be used more easily by Tron developers (and, ostensibly, dapp users).

Yet the price of TRX increased in the days leading up to Samsung’s flagship conference, from roughly $0.01 on Oct. 25 to $0.02 on Oct. 29, when it was clear Sun would speak at the event but there wasn't any clarity what he would be announcing. The price slid back down after the less-than-overwhelming conference announcement on Oct. 31.

“We have a real definition problem in terms of the language we all use. We think we are saying the same things, but we’re definitely not,” Rosario said, speaking to the ambiguity of what it means to “distribute” apps and tokens.

In neither case, Zhao’s denial nor Sun’s hyped-up speech, did token fans demand apologies or retractions for unclear or misleading statements that might protect or bolster the respective token’s reputation. Those demands are reserved for statements that could be seen as negative. (CoinDesk reached out to both the Tron and Binance teams. We will update the article if we hear back.)

Heliocentrism

Stepping back, Sun may have gotten involved with the latest anti-FUD meme war because it could impact his businesses as well.

One Chinese bitcoiner and crypto investor, who asked to stay anonymous to protect business relationships with the parties involved, said Zhao and Sun work closely together and such relationships “impact how liquidity will flow.”

Plus, Sun tweeted in October that he owns a “huge bag” of BNB tokens, along with the native tokens of other Chinese exchanges that “support” the TRX project. In some ways, the price of TRX may be influenced by Binance’s liquidity, which over-the-counter traders often described as unusually authentic and reliable.

Instead, Rosario agreed with Koeppen that the crypto market’s relative immaturity can make it difficult to distinguish puffery and personal politics from any deliberate intent to manipulate retail investors.

“There is a certain element of fake it until you make it for any emerging technology field,” Rosario said. “With Theranos, they had a product that they claimed worked. But it didn’t work. … Do any of these [blockchain] networks actually work? What does that mean?”