No one learned anything from the crypto crash

We’re six months deep in a crypto crash that wiped out $1.6 trillion of the asset class’s market cap, so what have we learned? Judging by the revival of the protocol that experienced the most dramatic implosion of the money, and a spate of new and bustling Web3 projects and multi-billion dollar investments: nothing at all.

Participants in the Terra-Luna ecosystem, where $40 billion was wiped out after a run on its UST stablecoin, causing untold pain to the average people who invested, recently approved a founder’s proposal to use the original blockchain and token. abandoned and easy to create a new blockchain. The new protocol is called Terra 2.0 and will not have a new version of UST but will revive the Luna token that crashed to almost zero. A protocol for booting NFTs on the new Terra chain called Soil was: announced kicked off Thursday with a tweet promising to “feed projects with nutrients and organic matter that together support life and build the ecosystem.”

There has also been a slew of new and ridiculous-sounding projects. STEPN, a new “move-to-earn” crypto fitness app has become extremely popular and rewards users with green Stoshi tokens (GST) for physical activity as long as they own at least one pair of NFT sneakers from STEPN. Sneakers generate energy that can be converted into GST tokens, depending on the “efficiency rating” of each sneaker. During the beta, players could earn between $5 and $50 depending on the type and number of NFT sneakers they own. New sneaker NFTs can be minted by burning GST and the game’s governance token (GMT), with costs increasing each time. If this sounds familiar, it’s because this is how Axie Infinity’s symbolic economy worked before its own death spiral.

STEPN users describe it for fun as a “ponzi”, and even mostly staunch crypto believers are warning other investors of the potential for a crash where they lose everything, but that hasn’t stopped the hype train.

Or just look at this blast from the past: WeWork co-founder and former CEO Adam Neumann is back with a Web3 climate startup that bills itself as a “pioneering climate technology company bringing carbon credit to the blockchain” with a carbon credit token called Goddess Nature Token’. fund to help disrupt carbon markets.

Also in the midst of the crash, Ethereum co-founder and figurehead Vitalik Buterin published a paper summarizing his vision for Web3. It revolves around non-transferable “soul-bound” tokens attached to “souls” that act as an augmented reality layer on top of social life. It’s safe to say that even with almost every cryptocurrency in the red, things start to get really weird.

Venture capitalists are also not done feeding the crypto ecosystem. A note from JPMorgan to its analysts reported that the crypto economy is largely being picked up by venture capital and is unlikely to change given the recent project collapses and asset prices in general.

A cursory glance confirms this: the industry’s largest investors are “crypto-native” companies with nowhere else to go, while the largest investor (a16z) has raised $4.5 billion for its fourth crypto fund to help it endure what it calls a “crypto winter”. Alan Howard, British billionaire and hedge fund manager, has also revealed that he has spent the past two years building a portfolio of investments in public and private markets, crypto tokens, NFTs, infrastructure, market making, trading software and more, and has no plans to to slow down.

“Cryptocurrency infrastructure was (and still is) heavily designed around the needs of retail traders. It was inefficient, cumbersome, illiquid and unable to handle the large-scale transactions that institutional investors need,” he added. I wanted a lower threshold for institutions to make it easier for them to enter the digital asset space.”

It seems unlikely that the political establishment will now retreat. On Tuesday, Cory Booker staffer Rashan A. Colbert went to Twitter as his boss took the stage to talk at the DC Blockchain Summit in 2022, summarizing the talking points “that he might be able to talk about”. Chief among these was that minorities, especially black people, “led the way in the adoption of digital assets,” that crypto was a commodity, not a security, and that it provided “incredible equalizing power and opportunity” for those not into the mainstream. traditional financial system.

When Spike Lee got it wrong and ran an ad for crypto ATMs last year, he used similar topics of conversation: black people, who, according to an FDIC survey, were underfunded because they didn’t have enough money for an account or hated unpredictable fees or distrusted banks, would feel at peace in an ecosystem dominated by volatile assets, unpredictable transaction costs and rampant fraud.

Not only were these talking points used earlier when the crypto markets were on the rise, but they were also used in the run-up to the housing crisis when lenders targeted minorities with subprime loans. As anti-crypto economist Paul Krugman noted, this was celebrated at the time as a way to open up homeownership to previously excluded groups, although they often didn’t understand how risky these products were. Since the bubble burst, black household wealth and home ownership have failed to recover — the COVID-19 pandemic has only made things worse.

In May, the Wall Street Journal suggested we could be witnessing the beginning of the end of NFTs given an ongoing decline in retail activity, but given the confluence of trends we mentioned above, it’s hard to see that happening. The reserve price for a Bored Ape Yacht Club NFT has dropped significantly but is still close to $200,000. A new NFT project called Goblintown.wtf (Goblin Town is what crypto investors call a major crash) has amassed a trading volume of $18 million. Motherboard reporter Maxwell Strachan has also written extensively about other incentives that could support NFT trading activity, namely speculation and capital raising in real estate and “metaverse” firms.

It’s worth repeating because of how incredible it is: Despite a six-month downturn that wiped out $1.6 trillion in crypto markets, we’re seeing investors who have everything to win rally investors who have everything to lose in a bid to to keep the crypto ecosystem afloat. We see attempts to paint crypto as a commodity rather than a security, rhetoric about financial inclusion for marginalized people despite rampant exploitation, the revival of projects that have already spectacularly imploded, and the revival of new projects that follow the beaten track. paths of past failures.

All this has led some crypto investors wonder if the bottom is really in it† with so much “fluff” in the air, there may be more left to fall to Earth. In any case, it is clear that no one has learned anything.

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