Many of us still remember the days when the internet was met with scepticism and fear. In the ’90s, the extent to which this technology would become an integral part of our lives was not obvious, but in the end, it went on to change our lives in the most unexpected and radical ways. As entrepreneurs that embrace cutting-edge technology – such as Roman Semiokhin – understand, developed markets today quite simply cannot operate without the tools and access that the internet provides.
Now, as we stand on the cusp of another technological leap in the world of currencies, it is worth drawing parallels between past scepticism towards the internet and today’s apprehension about the emerging crypto space.
With the world as we know it rapidly changing and shifting to a borderless ‘digital age’, Bitcoin and its peer digital currencies – by allowing for value transfer on the internet via blockchain and without a central intermediary – represent the potential for dramatic financial disruption. As trust in governments and legacy institutions plummet to all-time lows, this ‘rebellious’ nature of crypto is particularly salient.
Crypto, like any emerging marketplace, will inevitably face growing pains, but 2022 was a particularly difficult year. From the rollercoaster ride that was the Terra-Luna saga to the spectacular high-profile collapse of FTX, the fallout of which continues, these hurdles have served as catalysts for the sector to emerge stronger. With each crisis, regulations began tightening, with new security measures amplified, credibility negatively impacted and public awareness – and scrutiny – significantly increased. There is no doubting this is not the end of the turbulence and there is more to come.
Even after the FTX scandal, some of the world’s largest financial institutions, including BlackRock, HSBC Hong Kong and Deutsche Bank, among others, continue to cast their vote of confidence in the market. This should not be too surprising given that Bitcoin has consistently outperformed all major asset classes in seven out of the ten past years, and by a big distance. This sort of performance is something even the biggest crypto sceptics on Wall Street cannot ignore.
What is next on the horizon for a nascent sector that has already drawn institutional interest and spawned several innovations? Non-fungible tokens (NFTs), decentralised finance (DeFi), GameFi, decentralised social media and other crypto sub-sectors all hint at the transformative potential of digital assets in realms such as art, finance, gaming and social media. Through trial and error, groundbreaking use cases for digital assets will inevitably surface that will shift the way we do business and how we transact and interact.
There is also the sound argument that younger generations, entering their peak earning years, will provide a demographic tailwind for the crypto economy. The wealth handover from ‘boomers’ to the digital-native millennials and the younger generation, who view Bitcoin as a valuable financial innovation, is likely to drive the growth and widespread adoption of crypto assets. Governments will try to muscle in by introducing central bank-issued tokens, paired up to major currencies. It will be curious to see whether in the long term the populace accepts the schizophrenic nature of the state’s embracing of digital currency, which was originally designed as a tool to rebel against the establishment and traditional currencies and payment systems.
Although crypto may still seem radical, as the world continues its journey through a rapidly advancing digital age, the role of crypto assets as the potential ‘financial fabric’ in the new internet-led ecosystem is undeniable. Investors and corporations should look at ways to understand and embrace a disruptive and exponentially expanding space, preparing for a future where it may become the norm.
For more information about this topic, visit Roman Semiokhin’s website: https://romansemiokhin.com