The collapse of a cryptocurrency exchange illustrates both decentralised finance's risks and opportunities.
It's the largest-and fastest-wipe-out of investments in recent history. Despite being valued at more than $30 billion, one of the biggest exchanges catering to cryptocurrency enthusiasts filed for bankruptcy this week with an $8 billion hole in their balance sheet and questions about where their customers' money went. Investors and customers alike are wondering if their money will ever be recouped.
Decentralised finance is still relatively unproven, and the wipe-out underscores the risks associated with the road to a potentially trillion-dollar ecosystem of government-free monetary transactions, a road that ultimately might lead nowhere. "The crypto market has suffered a significant setback; however, we still have clients actively employing and growing", said Ben Horn, Partner at Space Executive - heading up the FinTech, Payments, and Crypto practice.
From what we see, there may be many opportunities for crypto leaders and the underlying blockchain technology as a whole given that Crypto is only one piece of the blockchain world. With BlackRock CEO Larry Fink stating that "the next generation for markets, the next generation for securities, will be tokenization of securities." The use of cryptocurrency is the most visible example of a decentralised, public ledger, blockchain, that records transactions across many machines. Many leaders only started seriously considering cryptocurrencies in the recent past.
Over $65,000 USD was reached by Bitcoin (BTC) in November 2021, and thousands of people jumped into decentralised finance roles to exit tech and conventional finance. However, we see the value of cryptocurrencies declining and with the crypto exchange filing for bankruptcy recently, the value of bitcoin was down about 75% from its all-time high, at around $16,000. This resulted in highlighting the businesses that had strong business models and the ones that did not which meant that tens of tens of thousands of people lost their jobs, while investors lost hundreds of billions of dollars.
Europe and Asia have developed significant guidelines around cryptocurrencies which the US lacks. Albeit it could be said that the collapse actually might create opportunities within the industry, particularly for lawyers, auditors, and compliance officers familiar with the asset class.
Why do we argue that this could in fact be the beginning of crypto? Well, outside of the collapse, this has nothing to do with the underlying blockchain technology and it would be worthwhile for those invested in blockchain technology to double down.
Healthcare and real estate see some of the most promising emerging applications of blockchain. It has always been a fierce debate whether cryptocurrencies have any underlying value, but blockchain could allow real estate investors to purchase tokens tied to underlying properties. Additionally, home buyers and sellers can easily track deeds, and other important property information in one place, making property transactions more efficient. With regard to healthcare, blockchain technology offers the possibility of digitalising and portability of healthcare records.
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