Crypto’s Necessary Downfall
Bitcoin has recently experienced a significant surge in price, but many investors have suffered extreme losses in the past years due to their holdings in cryptocurrency and its ongoing streak of volatility. Regardless of surrounding, there still remains a resilient community of believers who continue to support and engage with crypto. The period from November 2021 to November 2022 witnessed a drastic decline in the total value of crypto holdings, plummeting from $3 trillion to $800 billion — a large evaporation of value.
In my view, this decline in crypto hype has been a necessary and beneficial occurrence that only time will prove to help strengthen and shift its relevance globally. In order to preserve the future prospects of digital currency and its position within the realm of digital payments, it has to be viewed as a currency first. The excessive hype surrounding crypto led to an overemphasis on its role as an investment rather than its intended purpose as a currency. Investors became captivated by unrealistic notions that crypto would surpass traditional banks, evade regulations, and possess unparalleled capabilities. These beliefs were simply ridiculous.
This situation brings to mind an episode from South Park, where one of the characters, Eric Cartman, inherited a considerable sum of money. He used it to purchase an amusement park, envisioning a solitary experience without ever having to wait in lines. However, he soon realized that running the park required ride operators, security personnel, janitors, and maintenance staff. Consequently, the amusement park became crowded with visitors, undermining Cartman’s initial desire for solitude. This analogy perfectly encapsulates the cult-like mentality that surrounded crypto. People sought all the benefits without considering the costs or challenges, ignoring necessary situations that would have to occur to maintain its solvency and its ability to transact, thus giving it value.
It is inevidable that crypto will fall under regulation. This is a necessity. The idea that a world with limited or no government intervention is ideal is a delusion. There are many areas of our lives and in society where we NEED regulation. For instance, consider the consequences of a world without a health department — every meal consumed at a restaurant would pose a risk of illness. Without police, just simply driving a mile to grab a Starbucks could result in getting robbed or shot. Similarly, an unregulated currency would expose individuals to fraud and the loss of their entire savings. There must be a stable foundation to rely on, as demonstrated by the US Dollar, which benefits from the government’s commitment to protecting infrastructure, assets, and maintaining stability.
People need to know what they are investing in. Just the same as the people who create an investment security, need to know there are consequences should they choose to defraud the public.
For crypto to thrive, it must be incorporated into the banking system. Institutions need to be established to safeguard crypto savings, instilling confidence among users. Loans should be made available against crypto assets, enabling interest to be earned. Without such measures, crypto would struggle to compete as a viable alternative to existing global currencies.
Crypto possesses the potential to offer assistance to countries during times of war when hyperinflation may unexpectedly escalate. It can also empower citizens in emerging economies to conduct transactions in the event of poor behavior from their central banks, leading to mass inflation.
If you genuinely believe that crypto represents the future, it is time to abandon the notion of it being solely an investment. The days of purchasing a token for $1 and selling it three years later for $50,000 are long gone. The market has matured, and such exceptional returns are unlikely to be replicated. Instead, focus on assessing its viability as a currency. Monitor transaction volumes and observe the year-over-year growth in crypto transactions. The more transactions occur, the greater the adoption by users which will support sustaining the demand for digital currency.
