The ongoing saga of the 2022 crypto crash saw another chapter written over the weekend when Bitcoin fell beneath $18,000, thereby breaking a hypothetical line of resistance pegged at its previous all-time high of $19,783 in 2017. As BTC plunged, other coins with leading market caps like ETH, ADA, XRP, and SOL were all dragged down to pre-pandemic lows as well. Meanwhile, a growing roster of multibillion dollar crypto entities–once considered the vanguard of the industry–have collapsed or are on the brink of insolvency, from the Luna Foundation Guard’s implosion in early May to Celsius Network’s a few weeks after, to Three Arrow Capital presently.
Despite the swirling FUD, it’s important to bear in mind that crypto markets are not ebbing and flowing in isolation. The global macroeconomic backdrop has also dramatically worsened YTD as a number of interconnected issues–inflation, stagnant wages, rising interest rates, a rise in commodity prices, a global energy crunch, and fraying supply chains–have converged to force markets into bearish territory while sparking fears of a looming recession.
Watching the entire crypto market turn to deep red has forced some soul-searching as to what’s next. Most analysts are confident that BTC, ETH, and other leading coins will recover in the future. However, the current crash and the outflow of >$2T in assets from the crypto space YTD drives home the point that moving forward, something must change. After deep reflection, I’m increasingly convinced that this much-needed paradigm shift in the crypto culture will be a move by markets, investors, and institutions away from volatility and towards concrete crypto utility.
From the end of the last crypto supercycle to the current pullback, much of the crypto investment space has been characterized by a hyper-speculative culture that is essentially glorified gambling rather than strategic investment. The same volatility that generated million-percent gains for DOGE and SHIB holders has sucked hundreds of billions USD out of crypto assets in the last month alone, not to mention over two trillion dollars YTD. In this case, volatility is a double edged sword that ultimately confirms the old saying that, “what comes up must come down.”
Instead of idolizing volatility and the thrill of potentially limitless upside (and by extension, potential downside all the way back to zero), crypto markets and asset holders need to embrace a new mindset and investment culture that will help promote long-term viability. That new outlook was nailed by CZ\_Binance (CEO of Binance) in a Tweet from Saturday June 18th where he writes: “Utility value has staying power.” And I might add that by definition, volatility does not.
The viral Tweet thread received over 14k likes overnight, and points to a very real alternative for the crypto universe as it recovers from the current bear cycle, i.e. one that prioritizes real-world crypto/blockchain utility over the ability of a otherwise-functionless altcoin to generate six-digit marginal returns overnight.
BTC, ETH, and the other big-ten coins will almost certainly recover from the current pullback. But the same is not true for the hundreds of altcoins that plummeted to zero in recent weeks. What will take their place are providers of blockchain utility–products, goods, and services–that are in demand for their added value rather than promises of double-digit passive yields or infinite investment upside.
Crypto utility can come in all shapes and sizes, and is diverse as the blockchain industry itself. One strong and concrete example of crypto utility is the emerging crypto payment service providers and gateways, which can be thought of as the “blockchain” iteration of the revolution in social payment apps (think Venmo) that hit the market a decade ago. The case for the utility of crypto payments is easy to make, given the industry standard currently offered by traditional banks is slow, expensive, and encumbered by red tape. Crypto payments can be executed faster, farther, and for cheaper than any international wire transfer or remission service at least I know of, which means they have the potential to be of real, everyday value to users.
Different companies penetrating this niche are slowly creating a competitive and diverse market. A leader in the field is Bitpay, which is based in the US and offers a range of products and services for streamlined crypto payments between individuals and businesses. Oobit occupies a similar niche in that it recently launched a B2B2C payments app for use worldwide. It has also launched a centralized utility token–OBT–for rewards and rebates within its broader payments ecosystem. Utrust is another crypto payments innovator that focuses on e-commerce merchants and like Oobit, it also has an associated utility token, UTK.
In different ways, Bitpay, Oobit, and Utrust all provide added value through leveraging crypto utility rather than crypto volatility. That means enabling a guest worker to convert their paycheck into crypto and then send it home across the world in seconds at no cost. It means allowing college kids to pay for tuition and textbooks in BTC. It means creating seamless, contactless crypto payment options for retail in a post-pandemic world. It means keeping expectations realistic, and exploring how crypto utility can be utilized to create a better world rather than enriching the few and impoverishing the many.
Crypto payment solutions are just one example of the potential blockchain technology has to revolutionize the global financial system. Be it payment solutions, smart contracts, or the concept of digital scarcity created by NFTs–blockchain technology and cryptocurrency are already fundamentally redefining the way the world works. In step with that tectonic shift, we need to move beyond a culture of crypto speculation and volatility towards one of long-term value accruement and everyday utility.