Longer-term perspectives are needed to move the crypto story from speculation to tangible innovation, writes Bitstamp CEO Jean-Baptiste Graftieaux.
Image credit: Jean-Baptiste Graftieaux/Bitstamp
The current down cycle in the digital asset market has exposed crypto for what it still mostly stands for – speculation.
In the past few months, we have seen the market fall by over 80 percent, which ultimately exposed the poor risk management practices of notable market players, which has rightly led to regulatory scrutiny.
The so-called “crypto winter” has also shown that the behavior of market participants is still too cyclical and short-term – longer-term perspectives are lost in the recent “hype”.
This over-hyped hype, spurred on by social media, is causing the crypto market to overreact on both the upside and downside. This, along with deteriorating liquidity in global financial markets, has prompted capital flight away from crypto to “safer” assets. However, it is important to emphasize that all asset classes have suffered large declines over the past 12 months.
However, behind all these problems lies a solid base of market participants and manufacturers working on products and services that offer real, tangible value and benefits to customers. From solid blockchain projects transferring significant value across their networks, to crypto-based remittance and payment networks, crypto-based revenue-generating products that are superior to traditional vehicles, and other crypto-based equivalents of traditional financial products.
Additionally, the previous cycle has seen tremendous upheaval with the introduction of NFTs in the arts, music and fashion industries which, while still having a long way to go in terms of development, offer a new and exciting opportunity for younger generations to Perceiving the value of blockchain technology, but also about how they spend their free time – in the digital world.
With that in mind, I propose five key steps the industry should take to thaw out the crypto winter — from increasing transparency and mitigating risk to educating investors and working with regulators.
First, a proliferation of products and services that offer investors greater levels of risk control and transparency will be critical to overcoming the current instability. This will address the general loss of confidence in crypto that has acted as a catalyst for the market decline and lending industry turmoil.
Second, the industry should continue to educate users about the benefits of crypto-based services. The learning centers being launched by crypto heavyweights are crucial in creating more entry points for the millions of retail users interested in crypto as a way to diversify their assets.
Third, the industry should continue constructive cooperation with regulators to ensure increased market stability and investor protection. However, as regulatory pressures increase, there is potential for many nonsensical regulatory requirements and provisions. Therefore, in the absence of regulation, market participants must continue to self-regulate and be able to apply best-practice customer protection measures to drive further adoption.
When it comes to crypto adoption, the involvement of banks and financial institutions will be key to mainstream implementation. To achieve this, however, the industry must start building the necessary infrastructure (including commercial models and environmental controls) to make the transition from traditional financing more understandable and easy to implement.
Eventually, if the industry is to truly unfreeze the crypto winter and drive mainstream adoption, it must close its gender diversity gap. Recent studies have shown that women account for just 26 percent of crypto asset investors, and companies with a woman on the founding team accounted for just 17.7 percent of venture-backed blockchain startups between 2012 and 2018.
If the industry is to bridge the gap, it must work to make crypto more accessible by offering continuing education that doesn’t exclude non-experts. Likewise, exchanges and blockchain companies need to rethink their hiring strategies to lead by example and place more female role models in the industry. If the sector continues to ignore half the population, it can never achieve real mainstream acceptance.