With all due respect to the doomsayers, I am not a Cassandra.
At last check bitcoin prices are slightly above $21,000. But let’s imagine a situation that some will consider the worst-case scenario: a price crash that takes bitcoin to $5,000.
Would this be a disaster, some kind of black day for crypto?
This question recently was posed to me and I was surprised because I had never thought that it could fall under $10,000. But after mulling it over I replied that, no, it would not be such a bad thing.
I know that for maximalists, who see the king of cryptocurrencies at $100,000 in the medium term, bitcoin at $5,000 would be a nightmare.
The first consequence would be a slump in the broader cryptocurrency market, which currently is valued at $1 trillion, according to the data firm CoinGecko. Of that figure, 40% is represented by bitcoin.
Currently 19.1 million bitcoins are in circulation, representing a total value of more than $401 billion at current prices of $21,000. If prices crashed to $5,000, bitcoin’s valuation would fall to $95.52 billion. About $305 billion would be wiped out.
Many people will lose a lot of money. Painful as that is, many of them will stop looking at bitcoin’s price day to day, minute to minute, and plenty will probably lose interest in bitcoin altogether.
And that’s good!
The Crypto Industry Equals Cryptocurrencies?
One of the biggest problems in the crypto industry today is that the general public boils down the entire industry to digital currencies.
And generally, when people are talking about digital currencies, they are talking about price. And in turn, when they talk about price, they are talking about speculation.
Last year a lot of people got interested in cryptocurrency because they heard that prices were skyrocketing and that they could get rich quick. (Big mistake.)
But if bitcoin truly slumps and people stop thinking about immediate riches and retirement, the intense focus on cryptocurrencies will evaporate. The industry could then start from scratch and change the narrative to show that it is much more than digital currencies.
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It would give the crypto industry a chance to go back to the original promise: to build an alternative financial system to democratize finance, to make it accessible to everyone everywhere.
Developers can focus on building products and services and ensure that the fundamentals — particularly security — are solid. And regulators, which up to now have played cat and mouse with the industry, would be able to take a breath, engage with industry leaders and players, and create the clarity for which the industry has been clamoring..
Finance for All
At the end of 2021, during my last trip to Africa, I had the opportunity to chat with a few young people. I expected them to tell me that they knew a bit about bitcoin and maybe ether, the second digital currency by market value.
In fact, I was pleasantly surprised. They knew the crypto industry well. They talked about everything the crypto industry was going to change for them: giving them access to financial services (banks are a luxury in many African countries, serving mainly the wealthy); and enabling them to trade directly with people worldwide.
But above all there was the idea that they, too, could participate in this new economy. They seemed not to have forgotten the promise: the promise of financial services for all, which would give a chance to people who are often systematically excluded.
Bitcoin at $5,000 would also enable the industry to do some necessary introspection.
No More Secrets
One of the things that crushes prices is lack of transparency. Transparency cements trust. Lack of transparency prompts doubts, suspicion and the idea that something is being hidden.
As a journalist I must say that it is more difficult to obtain information on the people responsible for a crypto project than those working in traditional financial institutions.
Recently, I spoke with a crypto lender who wanted to buy out other struggling crypto lenders. The company wouldn’t say where its headquarters were. After research, we found out where it was, but a company spokesman demanded that it not be mentioned.
Here is a company that wants to buy companies whose main problem was lack of transparency, and the buyer itself insists on secrecy. This must change.
If one of the worst aspects of mainstream finance is secrecy and lack of transparency, the crypto industry can’t disrupt legacy institutions by doing exactly the same thing.
Finally, bitcoin at $5,000 would shake out projects that have no use. More than 13,000 coins are listed by CoinGecko, and experts say that more than half of these coins are empty shells.
It’s time for them to disappear, to avoid scamming naive investors, who will blame the entire crypto industry for the efforts of bad actors. The sector does not need this bad publicity. Its mission is too important.
