Have We Reached The Crypto Apex?
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Summary:
With the volatility in the crypto market, the lack of regulation, and the number of scandals that have plagued the industry over the past few years, many pundits, including Warren Buffet, feel we have already reached a crypto apex. Blockchain technology, however, is probably here to stay. It’s possible that certain changes need to happen, both regulation-wise and adoption-wise, for cryptocurrencies to leave their slump and reach a new apex.
Back in 2021, it seemed like everything was going crypto and becoming blockchain-bound. On the back of Bitcoin and Ethereum becoming mainstream, thousands of new alternative coins were created that made no sense to most seasoned investors. The emergence of NFTs was another crypto-related phenomenon that lost steam pretty quickly. Once the market took a dive in 2022, and YouTuber Coffeezilla had more crypto scams than he could possibly put in his program, many came to the assumption that we have already reached the crypto apex. Is this true, though? Is cryptocurrency a thing of the past? Let’s break it down below.
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Why have many people soured on crypto?
Crypto + interest rates
It’s important to understand that crypto was originally promised as a store of value and a hedge against inflation. Crypto’s decentralized ethos, along with its finite supply, should have made it the ultimate inflation hedge. What many fail to understand, however, is that Crypto was also booming in a period when interest rates were close to zero. During the most recent crypto boom of 2021, this was also combined with excess savings as a result of COVID-related stimulus injections.
Warren Buffet leads the naysayers
Certain key figures in the financial world have taken a negative viewpoint towards crypto. Perhaps the most famous is the great Warren Buffet, known to generations of people as the “Oracle of Omaha.” Here are some of Buffet’s reservations:
| Key Point | Description |
|---|---|
| No Unique Value | Buffett views Bitcoin as an unproductive asset, contrasting it with stocks of companies that produce tangible goods and services. He believes cryptocurrencies lack real value and are based on speculative trading. |
| Doesn’t Count as Money | Buffett has criticized Bitcoin for not meeting the traditional criteria of money, which include being a means of exchange, a store of value, and a unit of account. He refers to Bitcoin as a “mirage” and believes it doesn’t function effectively as a currency. |
| Lack of Understanding | Buffett admits to not fully understanding cryptocurrencies and prefers to invest in assets he is familiar with. He has cautioned investors against diving into assets they don’t comprehend. |
Other experts don’t really believe it either, such as Carter Seuthe, CEO of Credit Summit Debt Consolidation. While the underlying technology of cryptocurrencies, specifically blockchain, is a secure, effective way to create a permanent, unalterable record of information online, crypto assets with no real underlying value beyond that security feature aren’t the best way to make this technology into a viable trading asset,” he says.
We also spoke to Keiko, the founder of NihonArubaito. “Whether Bitcoin and cryptocurrencies have reached their apex in 2021 is uncertain. Whether Bitcoin or other cryptocurrencies will be widely used for everyday purchases on a large scale will depend on various factors, including technological advancements, regulatory developments, and changing consumer preferences. It’s an area of ongoing interest and research in the financial and technological sectors.”
Transaction times
Deepak Bala, CTO of Rocketlane, also thinks that there are issues with the transaction times of crypto. “A traditional finance network such as VISA can process up to 24,000 transactions per second (TPS). Bitcoin can only process seven TPS. The next closest competitor, Ethereum, can process 20 TPS.”
Cryptocurrencies like Bitcoin must catch up with the scalability of traditional finance networks to achieve mass adoption. Until they do, their value is only dictated by a hype cycle. - Deepak Bala, CTO of RocketlaneClick to Tweet
Scandals abound
Any time you have an asset by which people are making money with no regulation, scandals become the norm. Here are three of the most famous involving crypto.
FTX
- FTX was a cryptocurrency exchange that was promoted by various celebrities and influencers, including Tom Brady and Larry David.
- FTX eventually went bankrupt, and it was uncovered that the FTX exchange was unlawfully using customer deposits to trade crypto with its sister firm, Alameda Research.
- The founder of FTX, Sam Bankman Fried, was arrested and, at the time of this writing, is sitting in jail awaiting trial.
Terra USD
- Terra was a USD stablecoin (UST) that was to be pegged to the U.S. dollar on a one-to-one basis and not lose its value.
- A run on Terra occurred in which the supply of Terra dropped its price below the UST peg, causing a massive run on the currency.
- Terra brought its sister cryptocurrency, LUNA, along for the ride, with poor results.
Razzlekhan
- Ilya Lichtenstein and his rapper wife Heather Morgan, who is better known by her stage name “Razzlekhan,” were involved in a major cryptocurrency scandal.
- Ilya Lichtenstein admitted that he was the hacker behind the multi-million-dollar exploit of the crypto exchange Bitfinex in 2016.
- The couple later pled guilty in a D.C. court in connection to the $4.5 billion Bitfinex hack.
Why we might not have reached the crypto apex
It could still be coming for many reasons.
The fundamentals of crypto remain the same — It’s just timing
The fundamentals of cryptocurrency, which are decentralization, finite supply (as in the case of BTC), and blockchain technology, remain the same. In fact, many speculate that we might be going through the classic “turning point” phase, as defined by Carlota Perez’s 2002 paper on new technologies. Here is a breakdown of the phases.
| Phase/Key Point | Description |
|---|---|
| Irruption Phase | Initial interest in the new technology amidst stagnation and turmoil. |
| Frenzy Phase | Speculation dominates headlines, and exploration of use cases intensifies. |
| Turning Point | Occurs after the Frenzy Phase bubble burst, characterized by increased regulatory involvement and societal sectors’ participation. |
| Synergy Phase | Leverages investments and infrastructure progress into economies of scale expansion. |
| Maturity Phase | The technology’s limitations lead to stagnation and turmoil. |
Blockchain’s future remains bright
Just because cryptocurrencies might have taken a dive, blockchain technology still remains more than relevant. Here is where blockchain technology can really help turn things around:
Supply chains
Modern supply chains involve complicated logistics, different currencies, and an immense amount of paperwork. Blockchain can help solve this issue. IBM’s FoodTrust, for example, uses blockchain technology to track food items from production all the way to retailers.
Healthcare
Tracking all of the various patients, pharmaceutical requirements, and doctor visits is incredibly complicated with a centralized system. This is compounded by the importance of data security in healthcare. Companies like Medibloc are using blockchain technology to help hospitals and health providers manage and protect their data.
Voting
In 2018, West Virginia implemented a blockchain-based voting system for the midterm elections, and the results were outstanding. It was found to be safe, reliable, and immune from dead South American dictators hacking the system (joke!). Blockchain’s immutability could see widespread usage in global elections soon.
Regulation is coming, albeit at a snail’s pace
One of the major stumbling blocks to another crypto apex is the lack of regulation. This is the reason why you have crazy scandals like FTX and LUNA.
Some of the existing and more recent regulatory steps are as follows:
- U.S. tax authorities’ new rules: The U.S. tax authorities have proposed new rules following the 2021 infrastructure bill. These rules aim to treat cryptocurrencies similarly to stocks or real estate when they’re sold. Platforms or services used to sell or trade digital currencies might have to report transaction details to tax authorities.
- New York Department of Financial Services (NYDFS) updates: The NYDFS has announced new rules on listing various cryptocurrencies on its green list. The department will be delisting three tokens, with DOGE being one of them.
The real regulation that everyone has been on the edge of their seat about, however, is the SEC ruling on the Grayscale BTC ETF. An ETF available for retail investors should be like a shot into the market, allowing other institutional investors to offer a similar product.
What you can do now
Furthermore, you can still buy certain things with crypto, according to David Bakke, crypto expert at DollarSanity. Believe it or not, at some dealerships, you can buy a car with Bitcoin. You can also purchase items on Amazon with Bitcoin. Another surprising thing you can buy with Bitcoin is certain forms of insurance. So, while the revolution isn’t coming, I think it’s safe to say that Bitcoin has arrived and will continue to play a role in consumer purchases. Microsoft and AT&T also accept Bitcoin as a valid form of payment.”
You can also explore investments in crypto and blockchain technology with the help of these brokerages.
FAQ
Should I buy crypto now?
The short answer to that is, “We don’t advise on anything.” The crypto market is volatile, and there is a chance that it has already reached its apex. Careful due diligence should be done before before investing in any assets, particularly crypto.
What about Crypto, the video game character in Apex Legends?
You might have googled crypto, and out came an Apex Games match. Crypto is also the name of a video game character in Apex Legends, whose real name is Tae Joon Park. Crypto’s surveillance drone detects opponents via surveillance drone ability using drone EMP. Crypto’s drone allows him to spot people around the Apex arena using drone mode. His tactical ability and ultimate ability are to keep the drone alive while playing crypto. Crypto tactical ability, crypto passive ability, and crypto ultimate ability are all associated with the game character, not cryptocurrency!
Key takeaways
- Crypto has gone through many boom-and-bust cycles since its inception, but whether it has already reached its apex is anyone’s guess.
- There are some serious headwinds against crypto, such as its actual behavior in an inflationary environment with rising interest rates, many scandals, and big-name naysayers.
- Blockchain technology is still being utilized, and government regulation of crypto could send it soaring to a new apex.
- The fundamentals of crypto remain the same, and this could lead to wider usage.
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