Regaining trust

“Regaining trust” – a cartoon that illustrates how 2023 will likely see increased consumer protection in the crypto industry.

If crypto bulls like Mike Novogratz, CEO of Galaxy Digital still believe that Bitcoin will get to $500,000 in a future date, the industry ironically needs to embrace the very group of people it is supposed to be championing against, namely government regulators.

After consumers lost their shirts at crypto investment firms (e.g. Celsius) and exchanges (e.g. BlockFi), getting consumers comfortable again is going to require confidence boosting.

Perhaps it will require a form of deposit insurance, similar to FTIC’s bank deposit insurance that covers the first $250K of a consumer’s deposits, which was set up by President Roosevelt following the bank runs of the Great Depression.

Other suggestions are that crypto asset firms need to have the same type of public reporting laws as regulated financial institutions and reduce the percentage of their balance sheet with risky assets.

All of these would help increase consumer and institutional investor confidence, resulting in more assets flowing back into the crypto market.

The question for the crypto industry is whether it has the maturity to recognize that this is a necessary step for it to become the future of finance and deliver on its heralded vision.

“Yes, true about the need for a regulatory framework (and one with internationally accepted teeth). But even if the environment for crypto had a trusted regulatory and surety foundation, the current level of volatility would be a serious impediment to acceptance as a currency, or as a traded instrument for all but the most risk-tolerant few in society. A newsworthy day in FOREX trading of reserve currencies would have 1-2% peak-to-trough price volatility; a crazy day (e.g. the Yen last week) might have 3-4%. 10-20%, as happens regularly in crypto markets, would spook anyone expecting their crypto to act like a reserve currency.

As such, volatility as it is in current crypto markets might remain, but volume will tend to be inversely proportional to that. With current crypto daily volume being <0.1% of FOREX volume, there’s a long way to go before crypto could be fairly compared to the dollar, euro, pound or yen as a mainstream currency.”

Peter Henry

“Good one! Love these cartoons!”

Linda Fairchild

Talent and Marketing Agent at Linda Fairchild & Company

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