The FTX blow up has highlighted this strategic question.
This is one WITHOUT a magic quadrant. Crypto is either a regulated asset or a disruptive technology – but it cannot be both.
If you believe that crypto is a regulated asset, the easy trade is to buy Coinbase stock (COIN). Coinbase is fully regulated in the biggest market. However, that is a possibly unwise investment as there is something not right about a centralised regulated exchange as an on & off ramp for decentralised permissionless networks.
Regulators need to hold somebody accountable and that means a centralised permissioned network. Regulators can hold Coinbase accountable, but not Bitcoin.
Decentralised permissionless networks, such as Bitcoin and Ethereum are by nature disruptive – you CANNOT regulate them even if you can regulate their on and off ramps.
Every bull market has a narrative, which bear markets then debunk. The next bull market answers that bear market debunking. Look at Bitcoin/BTC market cycles since 2009:
- The 2013 bull market narrative (when very few people were paying attention) was “maybe this will actually be real” and the BTC price went to over $1,000. The bear market debunking was “well show me a real use case.”
- The 2017 bull market narrative was about ICOs changing early stage fund raising (the real use case) and the BTC price went to over $19,000. The bear market narrative was that most ICOs were a failure for investors, .
- The 2021 bull market narrative was about institutional money. Anarchic crypto was now wearing a suit. It was all about regulation, no more of those crazy ICOs. Crypto was just one more asset in the everything bubble.
The FTX blow narrative is all about regulation – without explaining what regulator will police a business such as FTX with over 100 entities all over the globe. Legacy exchanges have blown up, but then regulation prevented future blow ups by having a simple rule that prevents a regulated exchange from using customer assets. So this is easy if crypto exchanges submit to a single jurisdiction.
The next bull market narrative will have to show a use case that is more than one more asset for institutions. I think this will be a “first the Rest then the West” story but I do not know when the next crypto bull market will start.
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