Full piggy banks, negative interest rates, mistrust of governments and banks, but also enthusiasm for new startups, new possibilities and new technology. The hype surrounding cryptocurrency is getting bigger and crazier by the day. What can we expect in the coming months? In my latest article, I share the 6 key developments that will impact the cryptocurrency industry this coming summer. If you are only used to euros in your wallet, the names of the more than 9,600 different cryptocurrencies probably sound crazy to you. Dogs, hamburgers, Dracula and sperm… You can think of it as crazy as a digital currency has been named after it. It is no longer just the early adopters who buy these digital currencies.
According to a recent market effect study, 700,000 Dutch people have already invested in it and 3.5 million plan to do so in the coming months. According to research by Mastercard, that percentage is 40% worldwide.
Elon Musk has shown how strongly the sector can still be influenced with 1 tweet. If we zoom out and look at the previous bull run in 2017, we also saw a strong correction of -20% every month, which then quickly recovered. It will certainly not be the last correction in the market. Especially because in recent weeks it has been proven again how easy this is to achieve.
The Indomitable Bull
After the major crash of Bitcoin in late 2017 and the demise of hundreds of other digital currencies — the so-called ‘altcoins’ in early 2018 — I saw interest in the underlying blockchain technology and currencies fall just as much as the value of the currency itself. The few articles that appeared in the media were mainly negative in nature, focusing on the failed experiments of many organizations and the many myths surrounding crime and energy consumption, which were clearly not properly researched and substantiated. Bitcoin has since been declared “dead” 411 times.
It is wonderful to see how various startups and organizations have continued to build their products in the lee in recent years. Now that the flowers are blooming again, many of these products are being launched and enthusiastically received by investors. The insane amount of money saved during corona, the negative interest and the fact that saving is no longer profitable, has certainly ensured that interest in cryptocurrencies has taken a bird’s-eye view. And, The market is now very bullish.
The predictions of renowned institutions such as Bloomberg and banks such as Goldman Sachs that the price of Bitcoin can still rise to 100–150 thousand euros, only reinforces this. Moreover, The market value has risen from $200 billion to $2 trillion in just a few months. With the predictions about the number of new investors in cryptocurrencies, this will certainly have a strong positive effect on prices and market value.
2. To the moon… or not?
Unfortunately, the madness also creates various shadow sides. During the previous bull run in 2017/2018, I wrote about the importance of doing your due diligence before putting money into a cryptocurrency somewhere.
Bloomberg’s research into the previous bull run showed that 75% of the underlying cryptocurrency projects were outright scams. According to many reports, this resulted in billions of euros in damage, which the (mostly small) investors lost overnight and could not get back.
The many hacks of exchanges, where the cryptocurrencies are traded, also cause people to lose their digital currencies. North Korea has already made more than $2 billion from these hacks, according to a United Nations study.
People are looking for a still relatively unknown currency, which they hope will certainly ‘m00nen’ (go to the moon, crypto language for very strong rise in value). For example, the second best known and largest cryptocurrency, Ethereum, was worth 30 cents at its opening sale and has already surpassed $3,000 in value.
Crypto Influencers
In the search for these hidden gems, people quickly come across the crypto influencers on channels like Twitter and YouTube, who promote various cryptocurrencies with texts like “going to explode” and “going to the moon”. Some do this with a good financial-technical substantiation, as is also the case with stock prices, some purely with an unsubstantiated story, which later turns out to be paid for by the promoted projects themselves.
With the greatly increased value of cryptocurrencies, the number of investors and trading exchanges, it is becoming more and more lucrative for hackers and scammers to be active in the market. Even though security measures are increasing, it is becoming increasingly important as an owner / investor to take a good look at the security of your accounts and storage of the cryptocurrency itself. This is often not thought of, with all the consequences that entails.
3. Tulip bulbs in 2021
Just like in 2017/2018, I expect that the bubble will burst again at some point and the prices of many cryptocurrencies will fall very sharply. After the previous crash, the total market value fell by 80% in a few months, which was even more than the ‘dot-com crash’.
The fundamentals are stronger now. I expect that many projects will not suddenly disappear, because they already offer products and services and have thus become a full-fledged startup / scale-up. In addition, many large companies, banks and investors have invested in the various cryptocurrencies and have indicated that they will do so for the long term. Bitcoin treasuries provides a wonderful overview. All major banks worldwide have now also switched and are offering, or are going to offer, crypto to their customers: UBS, Goldman Sachs, Morgan Stanley and Deutsche bank. Dutch banks have indicated that they are not yet a fan.
In my view, various cryptocurrencies are therefore really here to stay. But currencies that even the creators have indicated that they created for fun (such as Dogecoin), I see in value and attention collapsing again in due course. There’s even a “dog token category” already, with token names like Shiba, Dogelon, Akita, and Ourshib.
Bubbles are good!
As I wrote in 2019: bubbles are good in my opinion. To separate the wheat from the chaff, take the hype off something and focus on real problems that a technology can tackle. They are rapidly providing wider acceptance, lots of PR and growth money for startups and budgets for organizations to experiment with and build on.
Think before you invest
As an investor in cryptocurrencies, it is extremely important to take a sober look at this yourself. Do you buy a cryptocurrency because just like in a regular company that you buy a share of, you believe in the mission / vision / product of the company? Or do you mainly want to gamble high risk high reward on a strong price increase? Unfortunately, research shows that 95% of people who choose the latter lose their money.
So take a good look at your current portfolio and any future purchase plans, to avoid coming home from a cold fair in the coming months.
4. Digital El Dorado
One of the biggest and fastest growing hypes in cryptocurrency and blockchain right now is certainly Non-Fungible Tokens (NFTs). More and more individuals and organizations are embracing digital art and collectibles. Recently, the total trading volume rose to the all-time high of $1.5 billion in one day. It’s not just the individual digital artworks anymore, like Beeple, which sold for $69 million. On the record day, half a billion worth of digital items were sold from the American basketball league NBA.
Traditional financial institutions are now slowly entering the world of cryptocurrencies, and so will the creative sector. From makers of art, music, films and books, to sports clubs and game developers, who put unique digital items on the blockchain.
Former employees of the two largest auction houses in the world (Christie’s and Sotheby’s) have set up Lobus, which makes it easier to manage art collections with NFTs, but also to (sell) partial ones. For example, you can purchase a digital artwork together with a few friends.
Meanwhile, the largest cryptocurrency trading platform in the world (Binance) has also announced that they are setting up an NFT platform. This will further increase the number of NFTs and their sales worldwide. As a result, the opportunities to trade in NFTs as a cryptocurrency investor are growing.
5. Bitcoin banking
The financial world is being shaken on all sides. The European PSD2 directive makes it possible for large technology companies such as Google and Facebook to enter the market.
A bit overshadowed by the NFT hype, but in my view at least as interesting is Decentralized Finance (DeFi). This revolves around decentralized financing instruments such as loans, savings and insurance, but also trade. The same products that we already know from banks and insurers, but the decentralized blockchain character ensures that the intermediary is removed.
Last year this market was worth a few hundred million, now the total value at the time of writing has grown to $130 billion, as much as the market value of banks like Deutsche Bank. In fact, the products have generated $250 million in the past month for the people who have invested in them.
DeFi on the rise
The various DeFi cryptocurrencies are growing at the same pace in numbers and value. The projects are growing and developing at lightning speed due to the madness in the cryptocurrency market. Not only the free PR, but also the amount of money invested in it, ensures rapid, major technological breakthroughs.
These are no longer just individual startups. Entire ecosystems are built with DeFi platforms, such as Persistence. Where the libertine-anarchist approach of Bitcoin was mainly aimed at making banks superfluous, you now see an interesting merger in many areas between the traditional financial institutions (CeFi, Centralized Finance) and DeFi. The Spunta project came from the European Payment Council, a large group of banks has set up the Marco Polo project and a large group of insurers B3i. The most recent highlight was the move by the European Investment Bank, which raised 100 million with a bond on the Ethereum network.
ING has indicated in a recent report (pdf) that they find DeFi more interesting than Bitcoin. A big step in the amalgamation of traditional institutions and these new decentralized variants and a starting point for an insane development around digital currencies.
6.Crypto Catch22
It is an interesting field of tension to exchange ideas with supporters and opponents of cryptocurrencies about regulation versus innovation. Governments are working in all kinds of areas to stimulate innovation, facilitate start-ups and organize a business climate, so that companies like to do business in our country. On the other hand, one of its core tasks is to protect citizens in the broadest sense of the word.
Current policy too strict
Media these days are full of articles about manipulation within the cryptocurrency market and the lack of understanding surrounding the lack of the right regulation. After the European Union announced that it would allow cryptocurrencies, the Netherlands wanted to become a frontrunner and example in terms of legislation and regulations in that area. Unfortunately, due to these strict laws and regulations, many companies have already stopped or moved to another country.
Now I am a big proponent of setting up a good legal framework in the field of cryptocurrencies. But if that stands in the way of innovation or even drives it away, I have my doubts about it. A recent court ruling between De Nederlandsche Bank and a cryptocurrency trader also confirmed that the current policy is too strict.
International cooperation needed
The recent IPO of cryptocurrency company Coinbase has been an important step for the industry, as the company has signaled from the outset that it is working with lawmakers to ensure a well-functioning industry. With the size and very large trading volumes now taking place within the sector, governments can no longer sit back and watch. This requires international cooperation. If it is made difficult for people to buy Bitcoin in the Netherlands, then they are with 1 click at a trading platform located in Malta, where they do have all the freedoms.
The most recent Crypto Crime Report from Chainalysis (the largest blockchain analysis company in the world) shows that less than 0.3% of cryptocurrency transactions are “suspicious” and that this percentage continues to decline. Something that former CIA director Michael Morell also endorses (pdf). Governments are still fully committed to the so-called ‘Know Your Customer’ and ‘Anti Money Laundering’ laws and regulations, even though they are widely known to be ineffective.
Governments react completely differently
We are currently seeing governments react completely differently. India, like Turkey, wants to ban cryptocurrencies. China is leading the way with the development of its own Central Bank Digital Currency, the most blockchain patents worldwide. And recently there was also the statement from the central bank that Bitcoin is an ‘alternative investment’. Even though it is causing power blackouts, according to the government, Iran continues to encourage the mining of cryptocurrencies such as Bitcoin.
In recent years we have seen how many companies have emerged and grown, despite increasingly strict legislation. From Uber and Airbnb to Google and AliBaba. I also expect that legislation and regulations will have an impact on the services within cryptocurrencies in the coming months. Important steps to make the sector more mature and thus more accessible to the general public.
More than a coin
In my view, due to the focus of many media on the prices of cryptocurrencies, we almost forget what all innovation is about: the cool products and services that are being developed.
The Limburg Fortuna Sittard was the first Dutch football club to release its own fan token. This allows fans to become more involved with the club in all sorts of ways. With his ‘Podcast 2.0’ model, Adam Curry offers podcast listeners the opportunity to thank / reward the creator with Bitcoin for every minute listened. In Heerlen, citizens are rewarded for volunteering with cryptocurrencies. Facebook is busy building its own digital currency ‘DIEM’ and has therefore teamed up with a company that will arrange the issuance of the coins. New developments are added daily, fueled by the large new amount of innovation money that is currently being pumped into the sector.
The new, the next, the never heard off
Steve Jobs wanted to put a cool phone on the market with the introduction of the iPhone. At the time, no one could have imagined that in 2021 we would work more than 4 hours a day with the device, with applications such as Instagram, Uber and Google Maps.
The same is the case with cryptocurrencies: we can only dream about what the next steps will be. Ethereum started out as the ‘supercomputer of the world’ with so-called ‘smart contracts’, but has now also become the foundation for the entire DeFi and NFT world. Waiting for the latest, brilliant invention. One thing is certain: crypto is here to stay.
This article is not financial advice and should not be viewed as such. It is my opinion and should only be seen from an info point
Jan Scheele is active in the web3 (blockchain, crypto, NFTs, DeFi) industry since 2013. Besides (former) CEO of a web3 scaleup and founder of an advisory boutique (working for governments, family offices and several multinationals), he is Digital Leader at the World Economic Forum and Board Member at the Blockchain Netherlands Foundation (BCNL). He is writing, consulting, speaking and training regularly about everything web3, all over the world. Furthermore, he is currently finalizing his book about the rise and global impact of blockchain technology.
