AnalysisCrypto's not for everyone, which is why it needs to be institutionalized
Crypto's not for everyone, which is why it needs to be institutionalized
Binance, the largest crypto exchange in the world, will pay a huge fine of $4.3 billion. Sam Bankman-Fried, the founder of the collapsed FTX, is headed to prison for decades. Celsius was revealed to be a house of cards and went bankrupt. Despite this, the crypto market is actually making its way to the next step: institutional adoption
The heavens opened on the crypto market, and everyone got wet: the last to be splashed was Binance, the largest crypto exchange in the world in terms of trading volumes. Last week it was learned that it had agreed to pay a whopping $4.3 billion fine to American authorities to end an ongoing criminal investigation, and founding CEO Changpeng Zhao (known as CZ) would be forced to resign, pay a $50 million fine and likely turn himself in and be incarcerated in a U.S. prison. Not long before, a jury found Sam Bankman-Fried, the founder of the failed crypto empire FTX, guilty of all the criminal counts filed against him. Thus, in an instant, the once billionaire, is now a convicted felon who can expect several decades in prison.
These are just two bricks from a crypto tower that completely collapsed in the last year and a half. With dozens of companies that found themselves in bankruptcy proceedings, millions of customers who lost their life savings, institutional investors who lost their entire retirement savings investment, and also some entrepreneurs who found themselves in prison, some who are awaiting trial and others who are still under investigation. Despite the great disintegration, it is a beginner's mistake to eulogize the market, which in its decentralized essence embodies the idea of ‘the whole is greater than the sum of its parts', but it is certainly possible to eulogize its dying parts. We present a story in four parts:
1. No heroes
Crooks are everywhere. Some particularly enthusiastic crypto people are seeing the magnificent disintegration of the crypto market these days and are rushing to try to stir the pot. Instead of addressing the problems honestly, they will talk about the traditional financial market and try to point out all the problems in that system. Also, the fact that the crypto market is meant to be a better alternative, and therefore should be better, is not relevant to them at that moment, but what would we do if we duplicated all the problems of the old world into a parallel world minus all the supervision?
It is appropriate to discuss and agree on an important principle: if the crypto market was built, among other things, under the idea that the financial system is broken and terrible and serves the powerful while exploiting all the rest; And if in order to deal with this problem an alternative system must be built, and if the key to its success requires the moderation of human involvement, and replacing "trust between people" with code and encryption; So we also have the duty to continue to adhere to this principle. It may seem basic, but in practice the crypto market is moving strongly towards a system whose lifeblood is network influencers, people, entrepreneurs and all kinds of promises they spread on social networks, aggressively pushing their wares as if they were selling vacuum cleaners door to door in the 1950s.
From 2017 until 2021, large parts of the crypto market built themselves around people. These were figures like Sam Bankman-Fried; Brian Armstrong of Coinbase; CZ from Binance; Alex Mashinsky, CEO of the bankrupt Celsius; Su Zhu, the fugitive defendant, founder of the failed hedge company 3AC; or Michael Saylor who just buys Bitcoin all day and sings by a burning fireplace about the meaning of digital life. Passing from person to person, trying to sell something - whether it's a broken and manipulative coin or a romantic story about their wild youth. In practice, we discovered that they were all a bunch of crooks, who brought all the rest down with them.
2. Good riddance to NFTs
Remember NFTs? The buzz word of 2022, that cryptographic protocol designed to signal ownership of a digital asset. NFTs were supposed to change everything we know about internet ownership, or at least that’s what some promised. Everyone tried to mint a series, every artist was looking to sell a piece, but it completely crashed. On the fragments of that dream, another small saga has ended in recent days that embodies everything that is bad and disturbing in the NFT market. Here is a case study as an example:
These days, a property rights lawsuit between Yuga Labs, the owners of the most talked about and well-known NFT "Bored Apes", and the artist Ryder Ripps and his partner Jeremy Cahen has been settled. Yuga Labs successfully sued the two for copying the look of the bored apes. So, what did we have here? The proponents of the NFT market claimed that this tool was a game changer — artists would finally be able to claim ongoing ownership of their works in the digital world and also draw royalties every time their work changes hands. Yuga Labs has been the business group that has pushed this narrative with unique force, pushing it using a host of celebrities like Justin Bieber, Jimmy Fallon and Taylor Swift to gain popularity. But the truth is that the group never created the series of bored apes, but a young artist named Seneca who received a small one-time payment for it. Not only that, but NFTs were supposed to create the possibility of encrypted digital ownership, and here the same company that developed the popular apes is turning to the courts—part of the same arbitration systems that NFTs asked for—to claim ownership of its property.
3. Crypto - not for everyone
"Mass adoption" is the idea that excites many of the crypto market participants. They work for this with unsurpassed determination. They push to change project protocols to make it easy to trade crypto, build centralized platforms on top of decentralized ones to ease the entry of the general public, and speak in praise of "stable" coins (like USDT) that are issued by a centralized entity (like the crypto company Tether), as a remedy for the centralization of the stable currencies (e.g. dollar) that are issued by another centralizing factor (the state). They argue about the speed of transactions and how to increase it, about entry barriers and how to remove them. And all the while promising (or dreaming) of the day when we can all use crypto. It's the way we'll choose to transfer value quickly, without borders, restraints or centralized institutional players. They will empower the poor, bridge theaters of war, be of value to refugees and free us all from the need to be accountable to countries and banks - but crypto is not for everyone, and was never meant to be a tool for the masses.
To take part in the market requires skill and time that many do not have, and as a result any effort to push for mass adoption has become a point of weakness or a loophole for fraud. This is not an estimate - just look at what happened to most of the centralized companies that emerged to support mass adoption - most of them went bankrupt, crashed completely or had to admit that they were engaged in systematic and criminal activity, defrauding investors, customers, money laundering and even terrorist financing. They turned out to be sickeningly bad, and exactly the things that the decentralized crypto market was trying to avoid. If anything can be stated with some certainty after these last two terrible years of the crypto market, it is to be wary of those who promise profit through ambitions, strategies, projects or coins that will lead to mass adoption.
4. Bitcoin ETF
In the background of all this is one unrelenting struggle - to approve a crypto ETF - and it’s not by chance. If crypto is not for everyone, if centralization has become a source of attraction for scams and money laundering, all that remains is to save the idea of the "crypto market for the masses" by establishing it as a speculative trading arena where there is easy and "solid" access for sophisticated investors. The first application for a Bitcoin ETF was submitted in the United States in 2013, and since then many other applications have been submitted and repeatedly rejected by the US Securities and Exchange Commission. And here, against the background of the regulatory and criminal pressure to cleanse the market of fraudsters and to vigorously monitor its centralized parts, we are one step away from the realization of a dream that contradicts every ambition of the first developers of the crypto market: to receive legitimacy from a centralized government authority for "innovative" digital assets, which are supposed to be completely free from centralized authorities.