The crypto shake-out is long past due. The $2 trillion hit to the industry has caused massive losses for both early investors and, unfortunately, for the smaller investors who followed suit.
The reasons for the shake-out have been written on the wall for years. A cowboy culture unfettered by any regulation gave rise to unreliable data, usurious fees, and poor service that resulted in investor distrust and cynicism. Every day, millions of investors interacted in good faith with crypto exchanges and market tracking sites but were stymied and even abused by those very same organizations who took their money.
There were no sheriffs in town. The SEC was trying to kill crypto and the CFTC was busy just getting up to speed, leaving it to the entrepreneurs themselves. Rather than thinking about how they could build a strong foundation – which could increase the size of the entire pie and their own share of it – the crypto bosses greedily attempted to scoop up cash and head for the exits.
Does this mean that crypto is going away, that investors will never see their cash again and that Bitcoin miners will be out of a job? Unlikely.
What we are seeing is that market forces are now injecting a measure of sanity and rationality into the sector. Yes, there will still be those who claim that the industry is built on thin air, and they point to the fact that these losses have had no real effect on our dollar driven economy. But in a year when the multiverse has taken on epic proportions in Hollywood, the crypto crash is a signal to us that we cannot afford to ignore the enormous opportunity offered by linking the two worlds.
Crypto offers too many benefits to simply disappear. The industry has been developing for 10 years, and the advantages are only now becoming apparent. Crypto tokens and the blockchain can provide a platform for social impact, allowing more equitable access to financial services to underserved populations, including affordable cross border payments. Fueled by crypto, the blockchain has begun to offer new beneficial services including speedy, secure and less expensive payment systems that can sidestep the slow and insecure systems we have had for 70 years.
Those holding crypto have long indicated a willingness to use it for everyday purchases. And the merchants are enthusiastic to have additional payment methods. A recent Deloitte survey found that 85% of merchants across a range of industries anticipate that digital currency payments will be ubiquitous in their respective industries within five years. And that 54% of responding retailers have already invested more than $1 million towards enabling digital currency payments.
Similar to the dot com meltdown of 2000, the current crypto shake-out will encourage more companies to create value through real products, services and advancements that not only create a larger market but a streamlined, cost-effective and stable market. For example, my company, PDX Global, is developing the first globally-capable mobile app to facilitate practical cryptocurrency payments via instant, no-fee transactions at stores and restaurants as well as online sites. Using peer-to-peer transactions via the secure blockchain we can bypass the antiquated and expensive payments systems used currently – avoiding middlemen, high fees and a substantial fraud risk.
A good stiff crypto winter should help the industry grow up. It will serve to bring basic decency and transparency into financial transactions that will benefit the consumers, the crypto companies, and exchanges. The requirements are not onerous. The exchanges can eliminate the zombie coins, tightly secure their networks to prevent coin theft, and give consumer investors an address, a phone number, and a live person to talk to. They can even reduce fees to bring more investors in so that increased volume can compensate for the lower fee income.
We are moving inexorably toward a more streamlined economy. Crypto is here to stay, as are the underlying architectures like blockchain. But during these turbulent times the industry survivors will be those who have the experience and wisdom to create value, just as in every industry.