1. The market bears a heavy burden for the damaging post-announcement pop and spiral.

Rumors that China was planning to regulate (and thus lift its ban on) ICOs started circulating in full force immediately after NEO’s initial announcement, despite absolutely no evidence to support this claim.

Slightly more plausible — but still similarly unfounded—rumors involved a high-level partnership à la Microsoft, Alibaba, or maybe even upstart Loopring.

More conspiratorial observers started reading into new NEO exchange pairings as a signal that larger players were moving to capitalize on increased trading volume. It seemed irrelevant that at least some of these pairings were planned and announced well in advance.

Add in some hastily-written commentary from sketchy sources, doctored screenshots, abundant moontalk, and a crippling sense of FOMO, and it’s really no surprise that NEO’s price briefly shot up to a near all time high before just as quickly crashing back down again.

Informed value investors recognized this pump for what it was and steered clear. More opportunistic traders might have capitalized on the increased volatility. Others may have re-balanced their portfolios in light of the price change.

But one thing is clear: the losers were the ones holding heavy bags after buying-in based on baseless rumors alone. When you get caught up in market mania, it can be tempting to grasp at the dots to form non-existent patterns — I know, because I’ve done it myself.

But the sad truth is that those who trade based on emotion alone are likely to sell at a loss when the market turns south. And if you find yourself in this group, you — not NEO or its affiliates — are ultimately responsible for buying into unsubstantiated hype.

2. NEO’s unprofessional announcement roll-out has undermined the launch of its first dev competition, and potentially damaged community trust

That being said, I’d be remiss if I didn’t mention that the timing and substance of the original announcement (and subsequent communications) were, shall we say, less than ideal.

First: the initial tweet.

The so-called “announcement” was nothing more than an image with a few Chinese characters, accompanied by a cryptic message describing a “challenge to the community.”

At first glance, this isn’t so bad. It’s not uncommon for companies to release these “teaser trailers” in the days leading up to major events. Apple, for example, often sends out creatively-designed media invites for its product announcements, often leading followers to scrutinize every detail in the hopes of unveiling clues about what the event might entail.

Source: The Verge

I can understand how the NEO team might want to build anticipation leading up to its first dev competition. It is, after all, an exciting new development with high-level partnerships and prize money to boot.

The problem with the initial announcement was two-fold:

The “announcement” itself was just a vaguely worded tweet with an attachment written exclusively in Chinese. A wider distribution strategy (e.g., website, official social channels, CoZ-managed platforms, etc.) with consistent messaging would have been more appropriate for an organization with a $2B+ market cap. Given NEO’s international community base, multiple translations would have also reduced uncertainty stemming from inaccurate second-hand translations.

More generally, the NEO team failed to anticipate how irrationally frothy the market had become. You can make a fair argument it’s not their responsibility to predict market movements, but some foresight into how the news might have broke in the current climate would likely have led to a better outcome.

Second: NEO’s response to market misinformation and subsequent communications

This is where things flew off the rails.

As to be expected, the announcement resulted in a huge uptick in rumors and misinformation. One notable post that purported to raise major “red flags” about the NEO project gained significant traction. This post was controversial, misleading, and poorly constructed for a number of reasons, which I will not get into here.

Instead, let’s focus on NEO’s response. Even though the community was already picking apart original article’s faulty claims and dubious intentions (/u/TooAlpha found compelling evidence that the author may have astroturfed the article using multiple Reddit accounts), Malcolm Lerider, “Head of R&D” for the NEO Council posted a well-intentioned, but poorly-executed response that only fanned the flames of fear, uncertainty, and doubt.

First off, the tone seemed unnecessarily defensive and confrontational. I can understand how frustrating it can be to have unfair (and yes, perhaps even baseless) accusations flung at your hard work, but that frustration is exactly why you shouldn’t be issuing a hastily-written response in the heat of the moment. Sending an angry email usually doesn’t pan out well, and it turns out that publishing an angry blog post that could influence hundreds of millions of dollars in trading volume isn’t such a great idea either.

But more importantly, Malcolm seemed to double-down on claims that the announcement would be about something big — and something new (emphasis mine):

Yes, we have a very eventful weekend with Ontology sneak-peak yesterday and NEON Exchange whitepaper release tomorrow. On top of this, we will present something new tomorrow. We do not want to hype, but we also want the community to be aware of the progress NEO and our ecosystem is making. It’s a balance, and it’s up to the community to judge.

The problem was that in eyes of many, NEO’s Microsoft-sponsored dev competition wasn’t anything new. In fact, the source code for the competition announcement page, including mentions of Microsoft, had leaked (on NEO’s public github repo no less) just a few days prior and were already being widely discussed in NEO’s Reddit and Slack channels.

That, along with the implication that the announcement would not be about Ontology or the NEON Exchange, sent speculation into hyperdrive.

Typically, between a teaser announcement (if any) and the official announcement, you will hear nothing but radio silence from the issuing organization. This is for good reason, since communications in such a fast-moving environment can lead to misinformation and sub-optimal exchanges such as:

It’s also hard to tell how your communications might be perceived after the fact, and I have a feeling that history won’t be too kind to this series of even more “leading announcements” from another NEO Council member:

Unfortunately with the botched announcement of its first dev competition, NEO has undermined the launch of an otherwise positive and exciting development. It’s unfortunate that the announcement of the news has become the actual news, but sadly that’s to be expected given current market conditions.

It remains to be seen how these events might impact public confidence in NEO in the short-term. Things move quickly in the cryptosphere, and outrage could simply dissolve with the next bull run.

But similar missteps in the future will begin to form a pattern — one that might be excusable for a bootstrapped startup, but not for an organization whose current holdings are worth billions of dollars.