Is the great crash the best thing to happen to cryptocurrency?
The great crypto crash of 2018 shows no signs of slowing down. A few days ago, this year’s ‘crypto carnage’ became officially worse than the dot-com crash of the early 2000s.
The trading volumes of the entire cryptocurrency market have fallen by 80% since January.
This is in stark contrast to the golden days of 2017, when Bitcoin neared $20,000 and the entire crypto market cap was at $700 billion. So what went wrong?
Here are a few recent developments:
- The U.S. Securities and Exchange Commission (SEC) suspended trading in two products/platforms – Bitcoin Tracker One and Ether Tracker One – that offer to track the price of cryptocurrencies. The reason? The SEC cited confusion as to whether these products truly are exchange-traded funds (ETFs), a type of investment fund that’s traded on stock exchanges.
- The SEC has come down hard on ETFs that track crypto. Back in July the SEC rejected (for the second time) an attempt by the founders of Gemini, a crypto exchange, to list what would have been the first cryptocurrency ETF on a regulated exchange.
- The SEC has pinpointed security, market manipulation and investor protection issues as major concerns.
- Goldman Sachs were reported to have indefinitely postponed their decision on starting a crypto assets trading desk. The trading desk had initially been proposed in 2017, right at the peak of the crypto boom.
- Further confusion was added when Goldman’s CFO called these reports ‘fake news’.
Reframing the narrative
And there’s another factor at play. Storytelling.
The dominant narrative around crypto in 2018 is one of failure, turmoil and hype. Market psychology is crucial to the mainstream adoption of cryptocurrency. In 2017 there was a lot of belief in the future potential of crypto. This year that narrative has shifted to fear, uncertainty and doubt.
Crypto is all about the future. Meaning it’s hard to visualize how value can be derived in the here and now.
Meltom Demirors, CSO of digital asset managers Coinshares, puts it like this: “Really the only metric we have for most cryptocurrencies is the price, and price is such an imperfect metric. What does actual utilization look like? That’s the struggle for crypto right now.”
Imagining the future
It seems crazy now, but you’d be hard pushed to find examples from past sci-fi films and TV shows of mobile phones. Not until they actually started being used in the real world, anyway.
This is similar to the state of crypto at the moment. It could revolutionize our world in ways that are not yet clear. And because they’re not clear, they’re hard to imagine.
Meltom Demirors again: “New technologies that shift the paradigm take a long time to really understand.”
This brings us back to recent comparisons of the crypto crash and the dot-com crash.
Let’s look at one of the survivors of that boom. Amazon. They scraped through the dot-com crash. Their shares plummeted. It took years for them to recover.
And recently they became the world’s second trillion dollar company. They’ve reshaped the very fundamentals of how we shop.
Looked at from this perspective, is the great crash of 2018 the best thing to happen to crypto? Could it be definitive proof that crypto and blockchain are not only here to stay, but that they could one day transform our lives?
Big question: will cryptocurrency survive the great crash?