Amid all the “Bah, told you it was all worthless” comments from skeptics lately, something crystallized for me. I wasn’t fully aware of how much the public perception of crypto had changed since prices last bounced along cyclical bottoms. Back then, crypto was a new kind of money, a global computer, an engagement incentive, a governance asset.
Well, in the eyes of the mainstream, crypto is a market.
Like many of you, I spent part of the year-end break explaining to family and friends that crypto wasn’t “over.” I pondered the magnitude of this misconception for a while before it clicked: it’s not that the crypto market has been financialized – we all know that, just as we all acknowledge the damage done to perception and sentiment by the collapse of some of the main architects and beneficiaries of this financialization.
Noelle Acheson is the former Head of Research at CoinDesk and Genesis Trading. This article is an excerpt from their Crypto Is Macro Now newsletter, which focuses on the intersection between the changing crypto and macro landscapes. These opinions are hers and nothing she writes should be construed as investment advice.
Rather, crypto has become just a market for most casual observers. That’s all, just a market. And since the market is in trouble, the whole concept obviously no longer makes sense.
Looking back, it’s not hard to see how this shift came about. Increasing institutional interest (Goldman Sachs! Fidelity! BlackRock!), prices (up 20% in one day! 80% down year-to-date!), fraud (Rug Pull! Exploit!) and regulatory concerns (protect investors! protect the financial system! ) made headlines that grabbed attention and encouraged more stories along the same lines. The power of repetition, as media coverage of the industry increased, cemented the association of “crypto” with “risky.”
I’m not pointing fingers at the media – many publications have done a great job of also bringing to light the more transformative aspects of our industry. But perception tends to cling to what it can grasp, and the “public” (generalizing here) is familiar with markets while not necessarily understanding Merkle trees. Price movements are easier to visualize than consensus algorithms. And the power of institutional signaling is more understandable than weighted decentralized liquidity pools. The markets narrative is stickier than the tech narrative because it’s more convenient. The risk narrative is stickier than the innovation narrative because drama is better at grabbing our attention.
The story goes on
Read more: Noelle Acheson – Shifting Crypto’s Focus
So the instinctive reaction here is to swear to focus more on the technological aspects of crypto – I and many others have argued for this elsewhere. But while that’s still the case, there’s another fundamental aspect of the crypto evolution that has been largely overlooked.
We know that crypto assets are both speculative and investment opportunities. We also know that they represent radically new technologies. We can appreciate that they are all of these at the same time. What’s harder to understand is that the advantage is the technology.
For the first time in our history, we have tradable assets that embody innovation. Sure, investors can get their share of the progress through stocks or exchange-traded funds, but they’re formulaic wrappers for potential revenue streams that don’t become available to the public until long after the innovation is first tested.
Amazon, for example, was founded in 1994 and spent three years building a startup existence before offering the public a chance to speculate. Facebook was founded in 2004 but didn’t offer a tradable asset as a bet on its potential until 2012. Both were considered extremely risky in the early days before the IPO, too much for mainstream investors. And both were extremely volatile at launch and for some time thereafter.
Read more: Crypto 2023 – What happens after FTX?
Even these examples are not exactly comparable. Amazon and Facebook are not new technologies. They represent a new use of a technology. And both have often, and particularly in recent weeks, seen their values shaken by corporate decisions and profit prospects based on the fiat economy. Bitcoin, Ether and others are the new technology. Technically, they are assets that move on new rails – but neither the assets nor the rails work or have value without the other. In addition, there is no earnings risk from strategic decisions made behind closed doors or from difficult economic conditions. It’s as if you had the opportunity to buy stocks on the internet in 1985, which gave you the opportunity to see their launch without any business risk.
Additionally, crypto assets open up support for innovation like no other tradable vehicle to date. They are pure technology games that anyone, anywhere can invest in without having to prove a specific early access amount. They are risky, yes, but new concepts tend to be, and education and platform disclosure rules could provide some protection without erecting pro-inequality barriers.
Crypto is so much more than a market. It’s also more than a new technology. It’s a new way of thinking about value, risk, funding and engagement. It adds a pitcher of philosophy to the financial soup, garnishes it with a few dashes of sophisticated code and a pinch of hype, and stirs it up for a whole new flavor of evolution.
Perhaps this year we will be better able to convey that message. Perhaps we deserve a more thoughtful type of criticism and a more nuanced approach to regulation. And as we think more about messaging, maybe even those of us in the industry can face the next cycle with renewed conviction that what we’re working on is probably more important than most of us realize.
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