The last two years have been pretty turbulent in the world of cryptocurrencies and blockchain.
Nevertheless, crypto natives and speculators are confident that the crypto winter will soon be over, bringing us broad-based rally and new all-time highs.
The general perception among committed enthusiasts is that the stage for this new bull market to unfold is already set. It could be the Bitcoin halving in 2024 that triggers it, or it could simply be the market forming a basis for a new rally.
The consensus among many is that the crypto market will make a comeback.
Well, I have bad news.
This new rally? Not going to happen.
I can say this pessimistic outlook is true, because history repeats itself.
The period before this crypto winter — during which the value of so many companies and services were grossly inflated, irrespective of their quality or business case — reminds me a lot of what transpired with the internet bubble and the subsequent dotcom crash. Having established Saxo Bank back in 1992, we saw first hand the rise and fall of some of these more frivolous entities and subsequently, the ones that pulled through.
After the crash in 2001, the market did indeed bounce back. The internet sector not only lept to new heights, but became the primary driver of the economy for many years to come.
Perhaps unsurprisingly, the companies that initially introduced the internet to the world were not the ones that saw it reach its apex. Aside from a handful of exceptions, the vast majority were consigned to the annals of history — and for the most part, deserved to be.
Some companies did enter the crash with solid business models and came out even stronger, despite suffering from massive mark-downs in value. Amazon, whose stock fell 95% when the internet bubble burst, came back to rule the world of online marketplaces because it had the right idea, and possibly foresight, all along.
We will see the same happen again with crypto. Blockchain will find an important place in the future economy and have major transformative potential.
But it will be the blockchains and the projects that are suitable for that future that will drive it forward. The future calls for regulated, industrial-scale blockchain use cases, not the silly and speculative applications we have seen in numerous cases today: The applications which have in many cases contaminated the space until now. These have negatively influenced public perception and distracted from the very real benefits of blockchain technology.
Application over speculation
The projects that will drive the next rally will be projects that support compliance, not avoid it.
Projects that will focus on adding real value to data security, processes and privacy protection. Projects that enable the tokenization of real-world assets, provide trust between actors and cut out inefficient middlemen and single points of failure in the economy as we know it today.
There is no reason to blindly believe that earlier projects driven by speculation and hype will come out swinging again after the current crisis. Funding for them has dried up and the retail user is unlikely to jump on the same bandwagon again, especially considering the newly arisen trust issues.
A still-maturing industry
The way forward now for the blockchain industry must be all about growing up and finding a stable footing. The mistakes have been made, and the cul-de-sacs have been tested.
Projects that fail will not get a second chance. Success will come to those who bring added value to our existing, fragile and often untrustworthy ways of doing business, while respecting compliance and regulation.
My money is on tokenization, logistics, data security, self-sovereign IDs and privacy functions, provided they are regulatory compliant. These will bolster current business processes, as opposed to developing businesses themselves. This technology essentially provides the infrastructure for the economy of the future, which is exciting enough in itself and warrants serious attention from investors and entrepreneurs.
The winners of this next stage will mostly be projects that are not at the top of CoinMarketCap today. History has shown that these transitions happen as a near certainty, and I am sure it will happen again. Look out for projects and blockchains that support that transition rather than those who already had their time in the sun. History repeats itself.
Although there won’t be a crypto market rally like many hope, there will eventually be a blockchain industry rally in the future.
But it will be spearheaded by the few existing projects that had the right idea all along — in addition to entirely new projects that have learned from the mistakes of the earlier generations, adapted, and established a clear innovative path beyond seeking short-term value based on fads.
Lars Seier Christensen is the Chairman & Founder of Concordium, a layer 1 blockchain. In addition, he is the founder and owner of Seier Capital. Prior to these roles, Lars was the co-founder and co-CEO of Saxo Bank for over 20 years, an investment firm providing the leading online trading platform connecting investors and traders to global financial markets. Saxo Bank services over 1 million customers with $12 billion in daily turnover.
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