The Case for Being Cautiously Optimistic About Crypto
By Adiel Barzel, Co-Founder of Crypto Index
Despite the lingering shadow of FTX's collapse and the ongoing trial of its founder, Sam Bankman-Fried, it seems that we are finally putting this chapter behind us in the crypto industry's efforts to regain its footing.
Although we certainly aren’t in a bull market quite yet, crypto’s recent down period, summed up by declining prices, exchange collapses, fraud, and a general feeling of crisis, has been transformational for the industry, allowing it time to consolidate and reflect. Already we are beginning to see signs of a future breakout.
Revamping the foundation
Crypto went from an industry seemingly on the verge of collapse and lampooned by many, to one where asset managers and mainstream financial institutions eagerly seek exposure. While BlackRock’s spot Bitcoin ETF doesn’t necessarily reflect an industry charging towards a bull market—or one even on the mend—it does show confidence in crypto’s staying power. But what has driven this shift?
As cliche as it sounds, the crypto winter forced the industry as a whole to self-reflect, refocus, and reorganize priorities. This ultimately led to a sector-wide cleanse where harsh market conditions washed away much of the scammy and superficial projects, such as scam tokens, that plagued the industry for years. What’s organically emerging now is an industry markedly more mature, professional, and determined to disrupt the financial landscape while being more open to collaboration.
These foundational-level changes have centered around anticipating eventual regulatory action, a greater focus on projects providing actual utility, renewed interest from traditional financial institutions, and a reinvigorated DeFi sector. Ethereum staking, which commenced just over a year ago with the “merge,” has already seen over $42 billion ETH staked, according to data from Staking Rewards, enabling institutional investors to enjoy convenient access to staking platforms geared for specific needs and enriching use cases for staked assets.
Industry-wide changes are well underway, but the changing tide in the crypto waters is possibly best represented by a steep decline in rug pulls, bankruptcies, scams, and hacks. This has helped rehab crypto’s image since the start of the bear market coinciding with a string of high-profile scandals. But that doesn’t mean it’s entirely out of the woods.
Proceeding with caution
While the industry is in a much better place than it was this time last year, the constant shouts of an approaching bull run on X (formerly Twitter) or in Telegram channels are premature, if not mildly concerning.
This type of hype and rhetoric is fine in small doses to help build industry morale. But unrestrained bull run hype can quickly become a distraction, and we have no evidence to prove that the industry is on the verge of entering one, such as GDP growth or falling unemployment. More importantly, too much hype risks falling into old habits and alienating potential adopters.
With the industry taking a more serious and long-term approach, generally speaking, it is vital to demonstrate consistency and maturity to build sustainable momentum. This shows outsiders that crypto is on the right path. Doing so requires the industry to simply continue innovating with an added focus on collaboration and communicating the value and need for digital assets.
Bitcoin and other top cryptos had a strong June thanks to the news of BlackRock submitting a spot Bitcoin ETF, but July and August were more capricious, dampening the spirits of some crypto investors. While insiders say the SEC approval of BlackRock’s and other’s ETF submissions is inevitable, industry leaders and developers must continue focusing on shoring up the foundation and introducing products, services, and protocols that enhance the existing ecosystem.
And all this can’t be done in a silo—collaborating and facilitating more interoperability and integrations will continue pushing the industry forward.
Nonetheless, optimism has to come with perspective as the industry still faces several challenges and uncertainty on multiple fronts. The cloud of uncertainty regarding how U.S. authorities aim to approach regulating crypto means continued volatility as a lack of oversight leaves room for scammers and malicious actors to exploit. And despite interest from mainstream financial institutions, crypto’s VC funding has taken a hit—although this is partially connected to wider economic conditions. Yet with less financial flexibility, the industry needs to maintain recent gains while preparing for any regulatory curveballs.
Next year is already shaping up to be a transformative year for the crypto industry. The best-case scenario would see a rise in low-cost index funds, more tokenized real-world assets, and a BTC halving event fueling demand. But most critically, we should witness the continued expansion of crypto services and wider adoption of blockchain within various industries.
When tallying up the industry’s wins and losses, the optimist has plenty to point at. Overall, the arrow is trending up, but the same could have been said during the months prior to 2022’s freefall. To take advantage of this period crypto companies of all shapes and sizes must make the most of their resources while gaining a better understanding of market and consumer needs to better anticipate product fits.
There are plenty of factors at play here which means there’s a scale of potential outcomes, but for the industry as a whole, the next year needs to be about staying the course while continuing to introduce new innovations.
About the author
Adiel Barzel, Co-Founder of Crypto Index
Adiel Barzel has more than 15 years as a sales and marketing professional. As a crypto businessman for the last five years, Adiel was the co-founder and general manager of an investment fund that provided him and dozens of other investors highly profitable crypto investments. Now that he has co-founded Crypto Index, he is fully dedicated to helping the company with the launch of its i20 token.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.