While business leaders showed cautious optimism at this year’s World Economic Forum (WEF) in Davos, Switzerland, the same sentiment wasn’t felt for crypto.
Compared to before, the once buzzy area of finance had a much smaller presence.
As our Jennifer Schonberger put it, “gone were the crypto houses every ten feet, bitcoin-themed pizza stalls and advertising from previous years.”
“I think regulated transparent infrastructure like ours is well-suited for this environment,” Jeremy Allaire, Circle co-founder and CEO which issues the stablecoin USDC told Yahoo Finance.
Circle, one of the few crypto firms present for the week, did offer some optimism. Though not regulated as a bank and having shuttered plans to go public via SPAC last year, it is still aiming to be a public company at some point in the future, Allaire said.
In the meantime, it represents 31% of crypto’s $136 billion stablecoin market, which many consider being essential to the industry’s less speculative future.
As Allaire told us, Circle carries a money transmitter license in almost every state. Its stablecoin “has actually grown since the FTX collapse,” by $2 billion since the beginning of November according to DeFillama.
Yet critics were not scarce at Davos.
For them, and more than 9 million retail and institutional investors waiting to get back their funds in bankruptcy, FTX’s collapse still looms as a shadow over the space.
"FTX and SBF are not an exception — they're a rule," Nouriel Roubini, the NYU professor known as "Dr. Doom" for his dire views on global trends, said on Yahoo Finance Live.
"Literally 99% of crypto is a scam. A criminal activity. A total real-bubble Ponzi scheme that is going bust,” Roubini added. The Economist went on to underline the reputational damage industry firms are facing as a general loss of trust.
In November, Bitcoin hit a low not seen for two years of $15,682 as FTX careened towards chapter 11. Two weeks later BlockFi followed.
The next month, Sam Bankman-Fried, a figure many believed to be one of the industry’s biggest stars, was extradited from a Bahamas prison to New York to face 8 charges of fraud.
While its total market cap has recovered above $1 trillion dollars as of last week, industry trading venues are far from regaining trust.
Instead, those companies have had to let go of thousands of workers. With Genesis’ long-awaited bankruptcy filing Friday, there are at minimum 10 million people who’ve lost their crypto for trusting a crypto firm with their funds.
Meanwhile, others in attendance such as IBM Vice Chairman Gary Cohn would not trash crypto but also refrained from commenting on digital assets themselves.
“I’m bullish on blockchain, and crypto, I really don’t have a view,” Cohn told our on-the-ground team, echoing a popular middle-ground view.
Of course, even when major companies separate cryptocurrencies in favor of investing in their own private blockchain platforms, the end product hasn’t always worked.
In late November, IBM, which has bet on blockchain since 2016, discontinued its global blockchain-enabled platform, TradeLens, launched with Maersk two years prior.
The technology platform, which digitized and secured shipping container tracking across the world was “viable” Maresk said.
But it didn't achieve “the level of commercial viability necessary to continue work and meet the financial expectations as an independent business," the company added.
“All of these three things, web3, blockchain, and the metaverse, are all going to happen,” Microsoft (MSFT) CEO Satya Nadella said offering a partial vote of confidence broadly of crypto to WEF attendees.
"But you need to have the killer apps, what is the use case that gets broad adoption, what is the ChatGPT moment for blockchain?"
Nadella was referring to the AI tool launched in November that has quickly racked up users and become the most interesting thing in tech. The executive told news outlet Semafor Tuesday it was in talks to invest as much as $10 billion into ChatGPT owner, OpenAI.
Is the crypto market’s collapse through last year holding the industry back from finding its coveted ChatGPT moment? Absolutely and not as much as it might seem.
An annual report from venture capital firm Electric Capital, shows despite crypto’s seemingly rough 2022, it has more monthly active developers than it did during its bull market.
Based on multiple years of data, Electric Capital finds every cycle crypto software developer activity tends to be less susceptible to market fluctuations, making their engagement levels a more important barometer than the industry’s Davos attendance for where things might be headed.
It found that in the fourteen years since Bitcoin’s creator Satoshi Nakamoto — who essentially spun up the industry working without pay — the industry’s open source full-time developers has risen from 1 to 23,343 and activity has expanded well beyond Bitcoin and Ethereum (28% of the total).
We’ll have to wait and see where those thousands of developers plan to take crypto next. In the meantime, their activity in addition to crypto’s less exciting price charts and its shrinking advertisements at Davos, the Bahamas’ Baha Mar resort, or any other place might be exactly what the industry needs to move beyond such a difficult moment.
“You can't get rich fast in crypto right now. And that's actually good," Chainalysis’ Michael Gronager told us, decked in an overcoat before the snowy Swiss Alps.
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