How will the crypto market in 2022 be different from 2018?

Abstract: The current cryptocurrency downturn appears to be less of a failure to deliver on the promise of innovative technology and more of a traditional financial deleveraging across asset classes.

The crypto market has meme lords, trolls, psyops, internet culture, and Ape non-fungible tokens (NFTs). There are always flags and stories, narratives and uniforms. Our Web3 voice and logo are unique, as are the suits and ties Wall Street wore on Black Monday in 1987, and so were the T-shirts of the early Internet.

But even as creative destruction brings tragedy to people’s lives, there is something to see and learn. Everyone, and I mean everyone, creates stories and reasons for what happened and what it meant, myself included.

Of course, as stablecoins, shadow banking and leveraged hedge funds wipe out consumers, the call for regulation will be stronger than ever. Calls for reconstruction will intensify, mainly from those seeking to deploy marginal capital. Some will point to Austria’s economic and personal responsibility and dig deep politically.

Then we calm down, get bored, and forget and repeat again. Man is a cell, and the crowd is a super-organism. There is only so much anyone can do to resist the corpus they are part of. And there is no good evidence that we should resist. In the face of permanent technological change that will reformat the very nature of human society, no Luddite is ultimately right. But maybe they’re happy about it.

bright side

Is there creativity and innovation in the swirling chaos of capital loss? Is it all recursive financial engineering, or is there some underlying operational economy and progress in the world architecture?

This is where we can see the big difference between now and the 2018 initial coin offering (ICO) crash, because you’ve been through it before. Then, a lot of money was raised for an early stage venture capital platform. Billions are made for things that are promised on paper but never actually built or used. This is a collapse of the creative space catalyzed by regulatory pressure on token fundraising mechanisms.

Fundraising isn’t an actual thing — if anything, it’s the responsibility of your investors before you build it. Also, there is little in the way of the Web3 economy. Ideas for how to organize Decentralized Autonomous Organizations (DAOs) or experimental NFTs already exist, but this time no one is making a living like an artist.

Instead, I think of my time at Lehman Brothers in 2008. We’ve seen Bear Stearns go out of business and get a fire sale and see who’s going to be next. Lehman? Morgan Stanley? Today, the name is different. Celsius? Three Arrows Capital (3AC)? Or rewind some more. Long-term capital management? Lehman Brothers collapsed when its counterparty refused to lend to Lehman because it was believed to be over-leveraged and its balance sheet underwater. This is an offering to the god of moral hazard. Every investment bank faces the same risks.

Innovation lasts forever

The crypto downturn in 2022 looks less like a failure to deliver on the promise of innovative technology and more like a deleveraging of traditional finance across asset classes. People use words like “bank run” or “insolvency” that you would use for a functioning but overheated financial sector.

Additionally, cryptocurrencies are much more correlated and integrated with the overall macro economy, hence the spillover effect of Fed rate hikes, thereby creating a safe-haven environment and lowering tech and cryptocurrency valuations, as was the case in 2018 year will not happen. We quickly entered the institutional world.

I’m definitely not saying that Web3 works perfectly or goes completely mainstream. Instead, I’m referring to systemic financial crises that have structural causes in the global economy. Yes, there are malicious actors who engage in “rug pulling” and scams, as well as hackers and thieves breaking into the equivalent of digital banks. The price slump exposed their conspiracy, and in the long run, their names don’t matter much other than an example of flagging swings in the charts.

However, the machines and bots we build in Web3 work well even as their total value locked (TVL) numbers drop. Not so with Lehman Brothers, Enron and other centralized corporate entities, whose bankruptcy proceedings and liquidations took years to wrap up.

Companies, individuals, and DAOs that survive these financial turns change their mindsets. Treasury bills should not be kept entirely in proprietary tokens. Risk management matters most when everyone is ecstatic. Valuation multiples are not fundamentals. Leverage accelerates the rate of change in both directions. These things are easier said than done. Luckily we have no choice but to adapt because that’s where we are.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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