The Crypto Winter is Deeper than we Thought
A Year Ago Today Bitcoin’s Price Hit a Record $20k
Volatility seems to be the mood of the month, as the stock market dips the crypto winter is deeper perhaps than we had anticipated.
A year ago today Bitcoin’s price hit that record high of over $20k. How quickly things do change in the land of crypto and innovation. Indeed Silicon Valley startups such as Facebook and Google have matured and in the process changed the face of innovation in America, effectively blocking it, meaning Chinese startups are the real ones who are scaling faster and higher from 2019 onward.
Bitcoins price of today? $3,418. The crypto market cap is almost unrecognizable at $110.3 Billion, full of altcoins that likely won’t exist in five to ten years time.
Coinbase was once not too long ago the #1 in the App Store, Bitcoin was above $10K, that was the norm. Bitcoin was volatile with a trickle of shitcoins. This is another market altogether. But is it another future for digital assets? In a market that’s less based on viable products and more based on sentiment and hype, you have to wonder at the efficacy of so-called blockchain innovation.
The Game of Thrones of crypto feels a bit more like fraud and hype dying a myriad coin death. Where ICOs pop and grab only to disappear into the wasteland of manufactured projects that felt more like exit scams than actual startups. Where do we go from here?
Don’t call me pessimistic when I call it as it is. The reality of business is not a game. We’re going to see and are seeing a definite sizable number of both cryptocurrencies and the businesses built on them simply collapse due to a lack of funds, evaporating communities, code death and false starts. That’s not a bad thing, but it is the reality.
STOs might hijack the enthusiasm of early ICOs and lead to a very different world, but the funds need to come from somewhere. Venture capital and crypto funds aren’t going to be wildly generous and greedy to the point of ICOs that burnt a hole through how the startup cycle was supposed to work. The products of cryptocurrencies need solid foundations to be sustainable. The problem is, the technology behind public blockchains isn’t even solid yet.
We have to rethink the role of Cryptoeconomics
Steemit has laid off 70% of its staff, and even mighty Consensys has cut 13%.
Do we want a world of digital assets, do we want our fiat money to go digital via the central banks, do we want stablecoins that are tethered to real-world currencies? Decentralization has failed, regulation is slow and fully half of even the so-called winners of the altcoin game look like scams!
What does the natural selection of crypto even really look like? With a nascent new technology like blockchain, “adoption” is going to take longer than people expect. Just as the knowledge cycle of an engineering degree goes ‘out of date’ faster these days, so too do public blockchains and the companies behind digital currencies and assets. Is anyone really safe but Bitcoin? Ethereum could be displaced. Ripple and EOS appear centralized to the point of being pretenders and the challenges of decentralized governance feel more like bureaucracy without clear leadership than a new business model.
Infighting and hacks appear to dominate the space where some of the initial enthusiasm has died. When you look at the actual products, adoption rates, and product-market fit — it’s nothing to write home about quite yet. There’s not been a killer app. Where a company like ByteDance can create killer apps — in the west it barely goes noticed. All you hear about is Bitcoin this and Ethereum that, when their impact on the economy, jobs or the future of technology is pretty negligible.
When the price of Bitcoin can itself be manipulated, what is the point of “digital money” at all? If digital assets are tethered to the first comer, how does innovation ever take place in such an ecosystem? Of the more than 2000 cryptocurrencies tracked by CoinMarketCap, hundreds upon hundreds will wither into disuse until their liquidity turns to ice and their price to zero. A cold harsh blockchain freeze of the crypto winter.
As the global recession slowly approaches, the crypto winter might endure, and it might wipe out thousands of blockchain startups that never got up and running. If the valuation of your company is speculative and you don’t have daily active developers and users that can scale, I’m not exactly sure what you expect.
The current leaders of privacy coins, smart contract ecosystems, and even stablecoins are not necessarily the eventual winners. Heck, if Bitcoin died it would probably be a good thing for the future of digital assets and blockchain innovation. The entire market is tethered to Bitcoin’s price in something that doesn’t feel decentralized at all, it feels fixed.
Facebook could acquire Coinbase, Amazon could acquire Robinhood and, in a sense, the world would be a better place. This idea that blockchain startups and crypto entities are somehow independent from the real world of markets and business cycles and the law of regulation is absurd. Mike Novogratz’s crypto firm lost something like $134 million in the first quarter of 2018 alone.
The digital asset space needs to consolidate with the real world, it can’t survive in a bubble and that’s what the crypto winter is all about. It needs Bakkt and Fidelity to give the public and investors new avenues. We also just need better blockchain startups with a clearer visions, better engineers and better leadership.
Somewhere in the process crypto lost its soul. Bitcoin became about hodling and getting rich and the human progress behind blockchain technology was lost. Crypto was hijacked by profiteers and young entrepreneurs that were more after profit than turning a new tech into a good thing. We deserve the crypto winter, we did it to ourselves.