A crypto meltdown occurs when the value of cryptocurrencies falls significantly. This can occur as a result of a number of factors, including market fluctuations, regulatory changes, or negative news about a specific cryptocurrency or company.
A framed drawing of a male hand holding up a middle finger, high and proud, hangs on the wall of Ruar Street Food, a burger joint in Barcelona’s Sant Antoni neighbourhood. The image captures the defiant mood of a group of about a dozen men and women in their twenties and thirties, all working in different parts of the cryptocurrency world.There are many detractors in this industry. However, as far as everyone here tonight is concerned, those people can communicate with the hand.
Given the onslaught of bad news, this goes beyond defiance and into the ZIP code of magical thinking. Few industries were more brutalised in 2022, with spectacular losses ($2 trillion in crypto assets, poof! ), gruesome bankruptcies (Terra, Luna, Celsius), and fraud charges against the sector’s highest-profile entrepreneur (Sam Bankman-Fried, of the now-defunct FTX exchange).
The devastation was not only financial; crypto’s reputation and promise have been severely harmed. Crypto, once heralded as the future of money, a challenge to the world’s central banks, and a wise investment, now stinks of disaster. Bitcoin fell more than 60%, shattering the notion that it could be used as a hedge against inflation. Thousands of other tokens fell even lower or vanished entirely.
Despite this, attendees at the Ruar Street meet-up, organised by the Web3 Family crypto community, are upbeat and ready for whatever 2023 has in store. Beer is flowing, cryptocurrency-themed T-shirts are being raffled off, and fries with creamy cheddar and bacon are being consumed. There are no signs of worry.
Before the second round, it’s clear that the crypto faithful are sticking with it.
Maria Rebelo, 27, is among the flock. She works for Ureeqa, a Canadian company that helps artists monetize NFTs, or nonfungible tokens. These are digital assets — photos, music, sports memorabilia, and so on — that are recorded and tracked by blockchain, the virtual ledger that underpins everything crypto. She waxed lyrical about how blockchain could lead to “a global community, rather than one government per country.””When we open up the decentralised world, we enable humans to collaborate in ways they have never before,” she explained. “That’s human growth.”
As per interviews in Barcelona and with executives around the world, a year’s worth of blunders has done little to dampen the enthusiasm of true believers. Many compare this moment to the 2001 dot-com crash, which wiped out even more wealth an estimated $5 trillion but produced some blue-chip companies. (“Amazon was down 90% at one point”) is a common refrain.
Joe Hernandez, who handles fraud detection for Gitcoin, a platform that promises on its website to “build and fund open web together,” expressed a similar sentiment. He was smoking on the sidewalk outside Ruar, wearing a purple-and-white varsity jacket with an image of an astronaut playing an arcade game on the back.
He is an American who happened to be in Barcelona at the time. Other digital nomads from China, Argentina, Portugal, France, Ukraine, and other countries have settled here, drawn by the city’s beauty and relative affordability.
Numerous people believe that crypto is to blame for the bad actors it attracts. Swindlers will continue to swindle.”Every cycle, a bunch of fraudsters show up, and a bunch of tokens disappear,” Hernandez explained. “Galling” is a good word for it. Because it turns off a lot of people.”
Some crypto believers see an upside to the 2022 wipeout. It was like a four-keg frat party that the cops broke up. Those who remain are proud to say that they were not distracted by the festivities.
“We’re encouraged now more than ever that we’re doing the right thing by simply believing in the fundamentals of crypto,” said Elion Chin, co-creator of Nimiq, an open-source payment system that allows users to hold and spend crypto directly from their web browsers. Nimiq, like thousands of other ventures, has issued a coin, which is down 92% from its high in 2021.
Despite this, none of the organization’s 27 “full-time contributors” have left.
“Money is important, but it’s not the only and complete reward our contributors receive here,” Chin said over the phone from Costa Rica. “They’re working with people they like and on something they believe will have an impact.
This is a frequent refrain. While cryptocurrency has been associated with quick riches, it is difficult to find people who will say they are waiting for a pay day. Instead, there’s a lot of serious talk about how blockchain will change the world how it will help solve climate change, streamline supply chains, and even reshape work so that more people can find jobs they enjoy. Because the blockchain is capable of handling any tedium.
Also there is a lot of talk about agitating for the release of incarcerated cyber heroes. Over cocktails, the crypto catechism quickly reveals an anti-government, libertarian streak. Among the giveaways tonight is a T-shirt that says “Free Alex Pertsev,” who is being held in the Netherlands on money laundering charges. He created Tornado Cash, a virtual currency mixer that has been approved by the US Treasury.
Only banks are held in higher regard than governments in this crowd. If you think of your bank as nothing more than a boring place to keep your money, you haven’t spent much time with crypto evangelists. These institutions are accused of profiteering, money laundering, and tracking how people spend, which is exactly the type of data the government is gathering in order to track your carbon emissions.
At least, that’s the impression of a young Italian at the Ruar meet-up, a guy in a smart blue sweater who could pass for a first-year management consultant. He didn’t want his name to be mentioned in this story, as part of a larger ethos of remaining as anonymous as possible.
He envisioned a future in which governments fine citizens for contributing to climate change, and he claimed that there is no better way to track this than through what those citizens spend, which only banks are aware of.He explained that the separation of church and state has been discussed for many years. The separation of money and state will be accelerated by cryptocurrency.
While supporters of cryptocurrency focus on wildly ambitious goals in an imagined future, critics point to daily debacles. As in the theft of $3 billion in cryptocurrency last year, according to Chainanalysis. Then there’s the unsettling fact that crypto makes life easier for criminals — human traffickers, drug dealers, ransomware extractors, mobsters, and the North Korean government, which employs hackers who steal crypto all day, every day.
“Awful things happen in crypto fairly regularly, and yet the crypto faithful are very good at separating them from their perceived ideal of crypto,” said Molly White, who runs the website Web3 Is Going Just Great, which chronicles crypto’s tribulations. “If something goes poorly, it’s always some other factor, like poor implementation. This makes it simple to maintain your ideological stance.”
Even though White points out, crypto has been around since 2009 but has yet to produce a single product or service that ordinary people use every day. Just wait, say crypto believers, who believe an epochal breakthrough is on the horizon. It’s like a cult leader predicting the end of the world on a specific date. When the apocalypse does not occur, core tenets are not abandoned. Instead, a new date is established.
Nonetheless, crypto’s public humiliation has compelled businesses to reconsider their strategies. There was a time when companies that weren’t even in the tech industry sought crypto magic by adding “blockchain” to their name, which frequently increased their stock price. Most notably, the Long Island Iced Tea Corp. renamed itself the Long Blockchain Corp., and its stock increased nearly 300% in a single day.
Today, the inverse is occurring: crypto-related businesses are dropping the “b” word. Riot Blockchain, a bitcoin mining company, was renamed Riot Platforms in early January. Applied Blockchain was renamed Applied Digital in October. “We’re broadening our scope,” an executive told the Wall Street Journal.Many venture capital firms that once pursued crypto projects are no longer returning phone calls.
Reinventions are taking place. Ziliqa, which has long marketed itself as a blockchain platform, is now foraying into the world of online games. Web3War, a first-person shooter, was released in October, and another eight or nine titles are in the works. The blockchain will be used to handle game-related transactions. However, the CEO, Matt Ryan, believes that gamers will not acknowledge.
“Individuals don’t need to see the blockchain; they just need to know that it works,” he explained via video from his London home.The term “quixotic” does not do this venture justice. Gaming is a mature and crowded market dominated by titans such as PUBG: Battlegrounds, which has been downloaded over 1 billion times.And what about Web3War? Approximately 5,500 people have signed up so far. Ryan is unfazed.
“I think if we get to 10,000, keep an eye on this,” he said. “It demonstrates that we have a product that people desire.”
Ryan admits that he is a natural optimist, as are the majority of crypto enthusiasts. This entails not only predicting a bright future for blockchain, but also ignoring its shortcomings.The Australian Securities Exchange cancelled plans for a blockchain-based trade clearing system in November, incurring a $168 million charge. Maersk, a Danish shipping company, unplugged its blockchain platform in November. According to a statement, “the need for full global industry collaboration has not been met.”
Lee Reiners, policy director at the Duke Financial Economics Center, is not surprised by these failures. He points out that blockchain is essentially database software, albeit a relatively unknown one. It would never have gained such a devoted following or attracted billions of dollars in venture capital funding if it hadn’t been linked to cryptocurrency.
And that, he claims, is a tragedy that no one has fully comprehended.
“Imagine if all of the money and talent that has poured into cryptocurrency over the last decade had gone toward combating climate change or cancer research,” Reiners said. “It’s a massive waste of societal resources, and it’s all because people wanted to make money quickly. Regardless of what they say, the perceived opportunity to get rich quick attracted the majority of people.”
Reiners’ belief that talent has been misallocated begs to differ. The gathering at Ruar ended late, with a small group discussing how the pandemic demonstrated that governments could easily control their populations, as well as how banks contributed. One attendee mentioned that a customer’s account had been closed because he refused to wear a mask while visiting a bank. If everything goes as planned, that customer will eventually have other options.
“From where I’m standing, there’s an opportunity to tell the world that blockchain enables a paradigm-changing positive future,” Hernandez of Gitcoin said.