Crypto: hype or innovation?
The current bitcoin crash is – again – raising questions about the crypto revolution. What kind of bubble are we witnessing, a purely speculative bubble, or will the underlying blockchain technology prevail? Meanwhile, some organizations that still believe in the technology are seizing the opportunity to acquire distressed crypto companies at a discount.
Surviving the bitcoin crash
Since its peak in November, the price of bitcoin has fallen more than 70%, while the total value of crypto tokens has dropped from above $3tn to less than $900bn. Obviously, references to previous bubbles are made. While purely speculative bubbles, like the infamous 17th century Tulip Mania, only move capital between speculators without really adding any value, technological hypes tend to trigger investments in R&D and thus result in new and better technology. The question is in which category bitcoin and the underlying blockchain technology fall. Some commentators point out that the deflating bubble in digital assets has exposed a fragile system of credit and leverage in crypto akin to the 2008 credit crisis. Others recall the dotcom bubble, claiming that the current crypto market collapse will not derail the blockchain revolution. Investments in the underlying blockchain technology may serve more profound economic or societal objectives (e.g. to manage a decentralized energy system or create transparency in a value chain). After the current boom, the technology might enter a new phase in which it has to prove its worth.
Broaden Your Horizons
- This report by Blockdata finds that 81 out of the top 100 companies based on market cap were using blockchain technology.
- Automakers are coming up with new subscription-based access to vehicle features. BMW, for example, was selling a monthly $18 subscription to heated seats in, among others, Korea.
- The crypto market isn’t the only market experiencing a downturn. This Bloomberg article discusses the drop in prices for luxury watches.
Picking up the crypto pieces
While investors are fleeing the crypto meltdown due to a confluence of macro-economic turmoil and internal factors (e.g. TerraUSD), some companies see opportunities. Goldman Sachs is planning to raise $2 billion to buy up assets at a discount from crypto lender Celsius. Meanwhile, crypto exchange FTX has offered a $250 million bailout to crypto lending platform BlockFi, with the supposed aim to buy the company. Earlier, FTX and Ripple had already announced that they are on the hunt for acquisitions. Even though the crypto space finds itself in a difficult situation, these developments seem to indicate that key players with a healthy balance sheet still believe in the fundamentals and are grasping the opportunity to position themselves for rosier times. Hence, is this the internet bubble moment for crypto that suggests that a crypto boom is ahead of us? If so, the question remains when to jump in. In its 13-year existence, crypto has not experienced a macro-economic situation like the one we find ourselves in now. This also leaves room for the possibility of more downward price discovery.
Horizons is a bi-monthly Dasym Research initiative to show you how the Dasym themes have been in the news. We publish the Horizons on our website and as an email newsletter. If you wish to receive the email, sign up here.
Do you have questions about the digitalization of customer’s daily lives? As a research-driven investment company, we want to be relevant to you, so please provide us with you questions and remarks. Your feedback will help us to drive our research agenda.