Despite Downturn, Crypto Adoption on the Rise
With the global value of crypto almost halving since its November 2021 peak, taking us officially into a bear market, one might assume investment would slow. Instead, established players are doubling down on crypto-related investments.
The Terra Luna collapse is still dominating crypto headlines, especially after the launch of Luna 2.0 last week. However, you may also have missed numerous articles about the mainstream financial players pursuing cryptocurrency adoption.
With the global value of crypto almost halving since its November 2021 peak – taking us officially into a bear market – one might assume investment would slow. Instead, established players are doubling down on crypto-related investments, giving the current landscape a different feel from previous cycles.
But why is this happening in a downturn? Well, crypto is by no means the only market feeling the pinch. Traditional finance TradFi is also suffering from the effects of rising interest rates, high inflation, and global supply chain issues. Here’s the performance of some “blue chip” stocks in the past 6 months: Shopify (-75%), Netflix (-70%), Facebook (-40%), Amazon & TESLA (-35%), Google (-20%). In short, everyone is experiencing choppy waters. All of a sudden digital assets’ performance over the same period doesn't seem so bad. Bitcoin is down 40%, and Ethereum is down 55%, respectively.
Despite the recent price correction, if we zoom out to the beginning of the pandemic, bitcoin and Ethereum have consistently outperformed all of these “blue ship” assets. Since March 2020 lows, BTC has gone 6X and ETH 10X.
Therefore, it's no surprise that interest in crypto has continued to grow. For example, last week, Venture capital giant Andreessen Horowitz (a16z) launched a $4.5 billion crypto fund, the largest ever crypto venture fund. A JP Morgan analyst report concluded that digital assets are now the bank’s preferred “alternative asset class.” In March, Goldman Sachs began trading over-the-counter BTC options and issued their first bitcoin-backed loan. Or consider the fact that individuals with employer-sponsored 401(k) retirement plans from Fidelity International will soon have the option to invest up to 20 percent of their retirement savings into bitcoin.
These trends reflect increasing public confidence in digital assets as long-term investments and will no doubt serve to catalyze adoption, bringing crypto even further into the mainstream. Ultimately, crypto is a long-term play as it is still in the beginning stages of adoption. Those who keep their cool today are most likely to reap the rewards in the months and years ahead.
