Newsletter: Brands in Web3 & Web3 in Brands #15

Welcome to Edition #15 of “Brands in Web3 & Web3 in Brands“, your regular dose of the latest news from the blockchain, crypto, and Web3 space, curated to provide unique marketing and brand strategy insights with a pinch of spice. 

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This month: As Grayscale’s spot Bitcoin ETF suffers more than $9.5 billion in outflows this year amid record inflows to its competitors, how should it react as a brand? The Coinbase communications team have had to deal with customer complaints of mysterious zero balance accounts in recent weeks; its response has been underwhelming. And critics smell the sweet scent of BS as Binance launches a new luxury crypto fragrance to celebrate International Women’s Day, but might it actually have a point?

How can Greyscale stem the tide of ETF outflows?

While most of the crypto space is in buoyant mood given Bitcoin’s recent rally to reach a record high of $69,202, there has been one major outlier. Grayscale Bitcoin Trust (GBTC) has haemorrhaged almost $9.6 billion in outflows this year to date according to Bloomberg. To people who haven’t been following the Bitcoin spot ETF story closely, this might seem like a strange development. After all, Grayscale has a legitimate claim to be considered the “OG” of institutional Bitcoin funds. Indeed, it was Grayscale’s decisive legal victory against the Securities and Exchange Commission (SEC), in which a judge found the regulator to have acted in an “arbitrary and capricious” manner, which paved the way for the approval of 10 ETFs in January. 

So why the exodus? Most analysts put down the outflows to one of two factors: profit-taking by investors who have been looking for an exit since before GBTC converted to an ETF, and flight to other competitors with lower fees. Grayscale can do very little about profit-taking, which is a natural part of its business, but it can do something about fees. Eight out of the 10 ETFs launched in January have fees of less than .5%, with Grayscale’s largest rival Blackrock (IBIT) coming in at 0.25%. In comparison, Grayscale’s fee of 1.5%, although lower than the 2% it charged as a trust, looks very, very steep, particularly when you consider that much of the competition are also waiving or reducing fees at first. 

Any branding specialist will tell you the same thing: people are typically willing to pay a premium for a trusted brand. As a case in point, Blackrock is not the cheapest when it comes to fees, but has attracted over $9 billion in inflows this year to date, the largest of any Bitcoin spot ETF since launch. It might have been a similar story for Grayscale: non-traditional investors who admire the fund for scoring a victory over the SEC may have been willing to look past fees alone when choosing a provider. But when your fees are this much higher than the competition, it affects your brand. As a result, Grayscale may be running the risk of leaving itself out of the conversation for new investors exploring their options. 

Coinbase’s Zero Hour: When balances hit rock bottom, an explanation is required

As a Web3 and marketing professional who uses Coinbase for some small transactions, the exchange’s recent technical troubles caught my attention. While I keep most of my assets in cold storage, I maintain accounts on most prominent centralised exchanges too. This is partially for the sake of convenience and partially because it's my job to keep informed about developments in the industry and understand the issues users are facing. 

Like everyone in the space, I was encouraged to see how spot ETFs and the upcoming halving event pushed Bitcoin to record highs in recent days, providing some positive news for Web3 after a challenging year. But my optimism quickly turned to bewilderment when I logged into my Coinbase account to find a zero balance. 

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How could this happen, I thought? I follow all the standard advice. I use different, strong and long passwords on every account I manage. I have 2-factor authentication (2FA) enabled using a physical security key. I have even disabled SMS authorisation for fear of SIM-swapping attacks. Despite all that, had I still been hacked? Had I been naive to trust a centralised exchange, even with a relatively small volume of funds? Years of being told “not your keys, not your coins” by cryptosecurity guys at conferences came flooding back. 

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Thankfully, these fleeting worries proved premature. I hadn’t been hacked and my funds were safe. However, the doubt sowed in the minds of me and thousands of other Coinbase users in those few minutes of uncertainty must have had an impact on their perception of the brand. In the maverick world of crypto, Coinbase has always played up the notion that it is a safe and reliable option that does things by the book. On its website, it emphasises that compliance is critical to its “mission of being the most trusted crypto platform”. 

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On the day, Coinbase’s response was limited to a short, terse statement on X and the exchange’s status page which read “We are aware some users may experience increased latency across http://Coinbase.com and a few users may see intermittent zero balance. Rest assured, your funds are safe. Our team is investigating this issue and will provide an update. Trading is not impacted at this time.” When the promised update was posted a few hours later, it simply stated that “a fix” has been issued. 

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This is the second time that Coinbase users have experienced this unwanted surprise in recent weeks, with the last incident occurring five days earlier on February 28. At that time, Coinbase CEO Brian Armstrong suggested that a surge in traffic had caused the problem, remarking that “it’s expensive to keep services over-provisioned, but we'll need to keep working on auto-scaling solutions, and killing any remaining bottlenecks”. 

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We all know that a surge in traffic could make a website temporarily unavailable. But why would it cause accounts to display a zero balance? In the absence of a clear explanation, the floor was left open to Reddit users and the crypto media to speculate.

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In my opinion, Coinbase could have managed their response better. While it was good that they acknowledged the issue and provided updates, they should have offered a detailed explanation after the fact to prevent speculation and reassure users that meaningful measures have been taken to prevent similar incidents in the future. A vague “fix” is not enough, especially the second time round. As a brand that aspires to be trusted, it’s crucial for Coinbase to prioritise clear communication and transparency during such incidents.

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Crypto never smelled this good

It was International Women’s Day on March 8, a time when corporations everywhere try to break away from gender stereotypes and celebrate the achievements and contributions of women. Not to be outshone, the world’s largest cryptocurrency exchange by volume, Binance, marked the occasion by… releasing a luxury perfume?

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Under the tagline “Crypto is Yours”, the campaign sought to take “inspiration from the conventions of beauty advertising” while challenging the perception of crypto as being predominantly masculine. The glitzy-looking bottle featured the Binance logo, a bright yellow liquid, and the obligatory French descriptor “Eau de Binance”. In a launch video, it was thrust into the hands of unsuspecting female shoppers at a pop-up mall, who were then asked “have you tried crypto?”.  

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To use a British phrase, it would be easy to “take the piss” out of this campaign. A critic might interpret the message to mean “While crypto bros are busy transforming the world, women just want to look pretty and smell nice”. The accompanying advertisement shows three women clad in yellow tracksuits who look like they are auditioning for a Gen Z reboot of Kill Bill. So it is unsurprising that it has attracted its fair share of mockery and criticism, which Binance must have been expecting and is a lot of fun to read.

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https://www.youtube.com/watch?v=-Dihkx8iky8

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But while it's fun to laugh at the expense of an industry titan, there are also the bones of quite a clever campaign in there somewhere. Firstly, it is not, as I had first feared, simply a cash grab where Binance are using Women’s Day to flog a limited-edition perfume. Instead, it is using perfume as a prop for a crypto awareness campaign targeted at women. There is an educational component too, with Binance offering a $25 USDT voucher to the first 1,000 women who complete a crypto beginner course on a dedicated landing page. The content is quite generic and predictable, but at least they have made some sort of effort to engage women on crypto issues. 

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However, the top-level message of the campaign is probably more important. By taking the historically female-centred world of beauty advertising and juxtaposing and subverting it with crypto, Binance is making a valid point in a playful way: if crypto is to achieve mass adoption, we cannot afford to neglect 49.6% of the global population. We need to change the perception that crypto is a man's world. While you can argue about the style and execution of the campaign and whether Binance is the best ambassador for the message, that is an issue worth considering for Web3 marketers.