Crypto’s Glory Days Hide An Uncomfortable Reality
The most powerful and well-connected people in crypto seem to think they’ve entered a period of enormous prosperity, if the industry’s inaugural balls are any measure.
That prosperity may continue for some time into the future. But I think a little sober-mindedness now might prevent a helluva hangover later on.
Whenever I’ve spoken to someone in crypto lately, they do their best to keep the conversation focused on the market’s boring bits—stablecoins and so forth—in an effort to highlight parts of crypto that are practical, not flashy. (Our Yueqi Yang heard much the same when she wrote a Weekend Big Read last month on the current state of crypto.) They also really like to talk up Donald Trump, and they think his presidency will be great for them. I’m not so convinced.
Trump has signaled to crypto that his administration will take a very light touch to regulation, and he himself, of course, launched a Trump-branded memecoin shortly before taking office that has ballooned his net worth. He’s gotten richer by embracing the lack of rules, which could encourage others in crypto to do the same.
Crypto has gone to some substantial effort to rebrand itself as a safe asset class, but by encouraging an everything-goes attitude, Trump could drive people out of the market who don’t have the stomach for topsy-turviness—or at least it could make them far less likely to hop in. And isn’t that what crypto is hoping to do—encourage more investors to enter?
Since Trump is unlikely to get tough, crypto may need to do what no industry ever wants to do: practice some unpleasant self-policing. If the stablecoin set really does want to win over more investors, it may need to do things like actively—and frequently—speak out against investing in junk such as memecoins, and keep such speculative stuff off trading platforms and exchanges. It could mean losing some business among crypto die-hards in a bid to appeal to a broader market.
I think there’s a political imperative, too. Let’s say crypto parties hard for the next four years, and anything and everything goes. What will happen if a Democrat takes back the White House? That president’s desire to press down hard on a Trump plaything could make the Biden administration’s ham-fisted approach to crypto look enlightened by comparison.