Long ago dinosaurs were the new thing on the planet. They were like crypto a few years ago. Their populations grew and they dominated the landscape. Then, right on time for a once every 20,000,000-year (on average) time table, a 10 km-wide asteroid hit the earth ending the era of dinosaur dominance. It immediately wiped out three-fourths of all animal life, led to the rise of mammals and, eventually, humans, and allowed only birds to survive as descendants of the dinosaur kingdom. On a lesser scale and affecting economics instead of all life on earth, regulation has hit the crypto world and we wonder, is crypto going the way of the dinosaurs?
Are We in Danger of an Extinction Level Crypto Event?
Crypto winter was tough on many crypto exchanges, DeFi businesses, customers, and investors. But despite the market cap of cryptocurrencies shrinking to a third of its peak value, the vast majority of crypto tokens, exchanges, and crypto investors survived. This is like a small asteroid hitting the earth, causing the loss of many species, and making room for the rest to evolve and prosper in a new world. So long as smaller but damaging events don’t come back to back the animal kingdom can survive. So can crypto if it has time to adjust to each shock as it happens.
Is Regulation the End of Crypto?
Aljazeera published an article asking if crypto is about to go extinct. They begin by describing the hubris of folks in crypto as it peaked in value in late 2021 and even into 2022 as it fell from its peak. The list of crypto casualties as the year progressed included TerraUSD, Luna, Three Arrows Capital, Voyager Digital, Celsius Network, and FTX. They conclude by saying that regulation will be another huge blow to cryptocurrencies and all businesses working in that niche. Their opinion is that the crypto world is in for a long dry spell as it gets sorted out and, hopefully, regains investors trust at some point.
Regulators Are Not Calling Crypto Illegal
Securities and Exchange Commission and Commodity Exchange Commission are pressing charges against crypto businesses. Most recently these include the biggest crypto exchange in the world, Binance, and the biggest in the USA, Coinbase. They detail a myriad of actions that these companies must take to comply with to be within the bounds of government regulations. None of the charges brought in lawsuits says that any virtual currencies are illegal. Rather they need to comply with the same kinds of rules and regulations that traditional finance businesses like banks, insurance companies, stock exchanges, clearing houses, broker-dealers, and the like have complied with for years. Wholesale changes are in store for DeFi and crypto exchanges. Some will survive and some will not without substantial changes.
Who Will Survive the Current Crypto Near-extinction Level Event?
Animals that survived the initial global firestorm of the dinosaur-era asteroid hit had to then survive a prolonged winter caused by dust in the atmosphere. Food was scarce. It was cold. Big animals that needed lots of calories only lived until all the carcasses had been eaten. Anyone without feathers or fur was in danger of freezing to death. There was not any time to evolve new traits to make survival possible. Either you had the right characteristics or you didn’t. The crypto crisis is not going to kill the world but within its own microcosmos the same sorts of factors are playing out as with the dinosaurs. Those who by luck or good planning are in compliance with regulators and have exercised good business judgement will make it through. Those who have not will likely fall by the wayside or at least see their operations downsized to the parts that don’t get them into trouble with regulators.
Stablecoins Are Doing Well Thank You Very Much
Stablecoins that were backed by hard assets like the dollar or euro have made it through the worst of crypto winter and are not being hounded by regulators. Unfortunately, that is not the case with algorithmic stablecoins of which many went bust. Bitcoin falls outside of SEC jurisdiction. Bitcoin wash trading is a major issue but that will be dealt with on an exchange by exchange basis. Ether, like Bitcoin is likely to survive and even prosper due to Ethereum’s development of smart contracts and other ways to do business and make money in the business world. In a sense, Bitcoin, Ether, and a host of stablecoins are the dinosaurs that luckily had developed feathers before the asteroids of crypto winter and regulation hit. Crypto is, in a way, going the way of the dinosaurs, evolving with the times and likely to prosper in its new niches as the world changes.
Is Crypto Going the Way of the Dinosaurs? – SlideShare Version