Turning Tide

The highly volatile digital asset industry has certainly seen its share of ups and downs in the last several years. Most recently, after going through a massive crash in 2022, the crypto landscape changed again in 2023.

Notably, Bitcoin has been the first to bounce back, becoming one of the best-performing assets in the first half of 2023. Bitcoin was up nearly 80% by the end of June, despite regulatory uncertainty in the US and the SEC’s enforcement actions against Binance and Coinbase.

So...are we simply witnessing just another cycle of boom and bust in crypto, or is the tide finally turning for digital assets?

While it may be too early to say a definitive yes, there are clearly waves on the horizon that are signalling unprecedented and fundamental changes for the digital asset industry:

🌊  Jurisdictions around the world are capitalizing on the US regulatory climate to attract the crypto industry. European Union has fully enacted MiCA (Markets in Crypto Assets) into EU law, while the UK, Hong Kong, and Dubai are all actively courting digital asset businesses with supportive regulatory policies to foster innovation and growth.

🌊  The use cases of blockchains and digital assets for tokenization and financial settlements are making significant progress with crucial development milestones and announcements of various mainstream partnerships (Swift, Visa, Mastercard, Chainlink, and more).

🌊  Traditional finance is doubling down on digital assets in a massive way. Five institutions have applied for Bitcoin spot ETFs in June alone, including industry titans like Blackrock, Fidelity, WisdomTree, Invesco, and Valkyrie. Europe's first spot Bitcoin ETF by Jacobi Asset Management is set to launch in July.

🌊  Integration between crypto and real-world assets continues to become tighter. MakerDAO, the issuer of DAI stablecoin, just purchased $700 million in US Treasury bonds to increase their reserves to $1.25 billion in non-crypto assets.

🌊  New markets continue to be created despite regulatory pressure on older centralized exchanges. EDX Markets, a cryptocurrency exchange backed by Citadel, Fidelity, and Charles Schwab, recently unveiled the launch of its digital assets business.

🌊  Ripple's long-drawn battle with the SEC reached a key turning point in June, with the court's verdict declaring the sale of Ripple's XRP token in the secondary market as non-securities and institutional sales as securities. This ruling will have significant future ramifications for the classification of cryptocurrencies as securities in the US.

🌊  The CEO of $9 trillion asset manager BlackRock, who once viewed digital assets with skepticism, has now done a turnabout calling Bitcoin an international asset and claiming that crypto could “revolutionize finance”.

The shifting tide and onset of regulations might create challenges for some of the pioneering industry players and will most likely face both resistance and criticism from crypto maximalists.

However, the changes afoot will ultimately make digital assets more accessible to mainstream investors and create the conditions for legitimate businesses to flourish and grow.

The current situation in digital asset markets parallels the introduction of stock trading regulations in the 1920s, which challenged many businesses but also created a framework for issuing and trading equities, which has served us for a century now and opened the doors for enormous wealth generation.

Convergence of the events above indicates that the tide is clearly turning for the digital asset industry. However, how swiftly and with what force the waves of change will come for the industry and crypto markets, remains to be seen. 🤔

Conclusion

I believe it will take another 2 years for the next iteration of products and protocols in Crypto/Blockchain/Web3 to become fully mainstream and gain widespread adoption.

The pathway to adoption could be through traditional players, like Visa and Swift, who are both investing heavily in crypto, or it might come through a disruptive new entrant. Regardless, the winners in this space will be those who show resilience and patience as the industry landscape shifts and settles.

In the short term, we will continue to see some volatility, but over the long term, digital assets will rebound strongly as use cases in tokenization and settlement become mature, traditional finance players bring credibility to the space, and regulatory uncertainty clears in the US market.