What is crypto? Crypto is a buzzword used to describe the blockchain industry as a whole. Initially only Bitcoin ruled this space but then there was Ethereum and then Dodgecoin and then 19000 more… From cryptocurrencies to NFTs there has been an explosion of innovation spanning multiple sectors. All leading to the behemoth of an industry that we have today.
Depending on your time frame you may be upset with the current conditions but what a lot of people don’t consider is that we are at the emergence of a new technology. A potentially defining one that will follow the cycles of all previous emergent technologies such as the telephone, television and of course the internet.
If you have been following the space for any length of time you know that crypto has “died” several times. The naysayers will argue over and over that crypto has no use case and is just another fad. The current situation would prove them right, markets are in turmoil and sentiment is in the gutter.
In the last 12 months there has been a sharp decline in the price of some of the largest cryptocurrencies. From a global cryptocurrencies marketcap of almost 3 trillion to under 1 trillion the market has seen a dramatic loss and many people have been shaken out.
2021 All time high - 2.9 trillion USD
2022 All time low - 815 billion USD
Source: https://coinmarketcap.com/charts/
The thing about emerging technologies is that you can’t put a price on its potential, especially when the base layer aka the internet is already interwoven with our everyday lives. This is why price is a poor metric for evaluating whether crypto is “dead” or not. The price may be down, down very badly but not dead. Here are a few metrics and reasons why I believe crypto is not dead:
Number of Users
The number of active users within crypto has seen a consistent increase over the past several years. Currently estimated at around 200 million and expected to 5-10x within the next 10 years. When compared to the adoption trajectory of the internet there are some eerie similarities.
Investor Inflows
2021 saw the largest amount of investor funding in the history of the industry. With multiple $100 million funding rounds there was no shortage of big capital trying to find the next unicorn. Projects across the board from exchanges, DeFi and NFTs received investors. Without a positive vision of the future in mind why would these companies invest so much capital?
During all of 2020, $5.5 billion of VC funding was put in crypto businesses, but in 2021, there has been about $30 billion of funding in crypto year-to-date, according to data by PitchBook. Crypto capital investments have increased 445.5% year-over-year and 2021 isn’t over, yet. - Jacquelyn Melinek
Source: https://blockworks.co/2021-crypto-vc-funding-tops-30b-market-is-superheated/
Not only Bitcoin Anymore
The early days saw only Bitcoin as an investable asset but from there the space has exploded with innovation. Not only a currency but an entire ecosystem emerged. With Bitcoin alone there is potential for mass adoption and with the advent of NFTs, smart contracts, gameFi, metaverse and DeFi the amount of uses cases for crypto are almost limitless.
Institutions getting involved
Many large companies have gotten involved in crypto in some form or another while others are waiting on the sideline. Institutional involvement means “dead” crypto has value and is worth investing in. A few well known companies hold treasury balances in Bitcoin such as Tesla, Microstrategy and Square.
Regulation is a hot topic
With the collapse of industry giants such as Terra, Voyager and Celsius came the eye of regulation. Although the argument of whether regulation is good or bad for crypto is up for debate it ultimately means that the government sees it as an actual asset class worth regulating. Once the government validates the case for crypto by way of regulation this gives the green light for companies such as hedge funds to allocate on behalf of customers without fear. This could open up the capital flood gates if done in a way that doesn't completely destroy what crypto is.
Runway - Operational capital
2021 saw huge amounts of capital injected into the industry by way of VC funding and token sales. This means many projects have ample cash reserves to keep operations going during the crypto winter. With the recent downturn in the market plenty of projects will get wiped out but those with solid fundamentals, business practices and enough funding to continue building during this cycle will make it out better and stronger than before.
Builders are Building
Crypto has unleashed a wave of technology that has many rabbit holes. Leading this wave is the builders. The people who connect the dots and code in order to create the ecosystems we use. Regardless of market sentiment there will always be builders building. Active developers have been increasing year over year, reaching an estimated 18,500 in January 2021.
Source: https://finbold.com/study-number-of-monthly-active-web3-developers-hit-an-all-time-high-in-2021/
Current Generation
To think that crypto is dead is to think that the current generation will throw away their hard wallets, liquidate their NFTs and abandon the communities they’ve created. The current generation is crypto native and may not even know it. The systems being developed now are becoming more prevalent in the lives of everyday people and the chances of them giving it all up is close to nil.
These are just a few examples of why crypto is here to stay. Perhaps not in its current form but through the cycles new and better products will rise, further pushing adoption.
In conclusion
Crypto is still a nascent industry and as with any new industry will face rough beginnings while it refines its purpose. Like the internet in the early 90s there was uncertainty and doubt around the seemingly at the time useless technology but today its difficult to find somewhere that is not connected. In order to be part of something as defining as crypto, having a longer time horizon is a necessity and the cost of opportunity. Great things take time and for those that are patient enough the potential for exponential rewards awaits.
Crypto may feel like it's dead but really it's just taking a much needed breather. Will you stick around long enough to see?
Of course none of this is financial advice and I am just giving my humble opinion of what I have learned. Do with this advice what you will.
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