Cryptocurrency hasn’t found a definitive footing in the financial market yet. Even with 2021 being a breakthrough with the attention that the market received, the high was just budding. 2022 turned out to be an unfortunate year for digital currency. Bitcoin and Ethereum are down 65% YTD. Will Cryptocurrency survive?
FTX COLLAPSE’S AFTERMATH
With FTX Collapse in November 2022, the publicly hated (ex)billionaire Sam Bankman-Fried is now discredited and facing criminal charges. His irresponsible social behavior is being mocked by people who hold him accountable for being robbed of billions. The Australian Financial Review claims that the inner circle of the FTX-Alameda had a chat group on Signal named “Wirefraud.” The alleged purpose of this group was to share secret information about operations.
Reports suggest that bankruptcy-declared Alameda Research’s former CEO, the cryptic Caroline Ellison, has retained a top US SEC crypto regulator for assistance after being implicated in the meltdown of FTX.
With the law authorities on the crackdown on crypto firms, the market is more volatile than ever. Crypto firm BlockFi filed for bankruptcy too in November.
FTX AND BINANCE
FTX’s arch nemesis, Binance, was on the rise to become the face of crypto after FTX fallout. Changpeng Zhao (CZ), the chief founder of the crypto exchange firm, has gained more notoriety in the media.
Binance is reputed to be a ‘shadowy giant’ which does not pay heed to rules and plays the market on its terms. It also cited irregularities and refused to affiliate with Sam Bankman-Fried’s FTX before the bankruptcy, which raised concerns. After a debacle with SBF and Ellison on Twitter, the truth was revealed.
Unlike SBF’s active social presence, CZ avoided any engagement with countries that were not friendly with crypto.
Zhao even once said, “Regulation is a risk.” In light of FTX’s downfall, the crypto exchange firm claims that regulation is inevitable and is taking steps to change its reputation.
Zhao presented himself as the savior of the crypto world with his recently increased social media interactions. He is trying to promote transparency to other investors.
#bitcoin is not dead. We are still here.
— CZ 🔶 Binance (@cz_binance) November 20, 2022
But with Cryptocurrency, nothing is the whole truth; everything is a gray facade.
Binance has been investigated since 2018. Zhao may soon face criminal charges of unlicensed money laundering conspiracy and sanctions violations. Earlier in the year, Binance stated that from all of its 2021 cryptocurrency transactions, only 0.15% were affiliated with some illicit purpose.
Reuters reported that Binance held weak anti-money laundering controls and transacted over $10 billion for companies evading the U.S. and for criminals.
Is Cryptocurrency’s future bleak than ever? The financial industry has always been expected to associate with the security of money and trust. But the grounds are shaken with more frauds and scams coming to light. What is the future of money in Cryptocurrency?
THE FUTURE OF THE CRYPTO MARKET
While the crypto market is still unpredictable, experts believe regulating and adopting crypto payments may stabilize the market more.
Senator Cynthia Lummis announced at the recent Crypto & Digital Assets Summit in November of The Responsible Financial Innovation Act. The bill would restrict the reuse of collateral, increasing the risk of market contagion.
It’s highlighted to the members of Congress who did not take the time to learn more about this asset class. I think it’s time for them to gain more knowledge about it so we can engage in proper regulation.
– Sen. Lummis
The trouble with the crypto market is its volatility with untested sources. It claims to solve a redundant problem.
With the public outcry for regulation from the crypto collapses, investors and stakeholders want answers. It will be difficult for the government to ignore this dissatisfaction.
With the rise of digital payments and online banking technology by the same currency used in cash transactions, how did Cryptocurrency come into the picture?
An instance could be the 2008’s financial market crisis. People lost trust in the banks and other financial institutions when they were incompetent in dealing with the collapse of housing prices. Then, the government and a new regulatory faction were placed behind them to regain trust.
That was when Bitcoin was born (31st October 2008). The idea was to create an electronic payment system with a solid base of cryptographic evidence. People could opt into a secure, decentralized network called Blockchain. Experts have suggested that Cryptocurrency would be a strong contender to existing centralized financial systems.
A closer examination of these 15 years’ history is evident that crypto turned out to be the same. The system consists of trusting a DeFi lender, wallet, or token. The most ardent crypto traders, too, believe that the crypto market needs government regulation to prevent cyber frauds and hacks.
For a while, crypto traders have used this alternative to traditional banking systems to avoid political or economic risks. So with the regulation in place, how does it make it different from the common currency?
As the first quarter of 2022 ended, Mint reports that the total credit to the non-financial private sector was more than $37 trillion.
WHAT COULD BE THE KEY TO RETAINING CRYPTOCURRENCY?
Money is all about trust.
Since crypto has not been able to prove its forte in the same, what else can it be used for?
One of its essential characteristics is to facilitate transactions. As we are all aware, Real estate and Mortgage lending are infamous for their complex paperwork. Tracking essential information about these sectors’ properties, loans, and more can make crypto an imperative digital ledger.
If regulated and reputed financial companies transfer their documentation procedure to such a promising ecosystem, it is likely to decrease the inevitable time spent on such formalities.
Popular companies are investing in this blockchain platform.
JPMorgan describes it as “Seeking to help address the challenges of border payments and provide the next generation corporate treasury services.”
Fintech giants like PayPal also announced that they would allow users to buy on their platforms. Elon Musk’s Tesla holds billions in the crypto ecosystem and accepts Dogecoin and Bitcoin payments. Studies predict an increase in this kind of buy-in.
This could mean that crypto could be the next regulated and secure database of established business transactions.
Stability in the most-volatile market has the power to do three things with a good balance:
- The clarity for companies to innovate in the economy.
- Prevent frauds and scams with un-hackable ledgers.
- Protect all traders and investors.
The entire financial ecosystem could manifest in different types of systematic trust. A combination of trust in existing banks and institutions, trust in the shield of regulations and trust in the digital ledger can ease the history of financial market crashes.
