City comment: Despite market meltdown, write off crypto at your peril
That popping sound you can hear is a bubble bursting.
The fall of speculative tech stocks and crypto since the start of the year now equals historic market collapses such as the dotcom crash and the financial crisis, according to Bank of America.
Businesses and share prices propped up by a decade plus of cheap money and supercharged by pandemic stimulus have quickly come undone as rate rises uncover projects built on little more than bluster and hype.
As Warren Buffet famously said, only when the tide goes out do you discover who’s been swimming naked.
Losses have been most notable in crypto, where some tokens have suffered total collapse. Regulators and financial advisors have been warning this could happen for years.
It would be easy to write the sector off but you shouldn’t. Crypto was born in the crucible of the financial crisis and has been through many crashes in the past. Each time it has come roaring back.
Yes, there was a lot of dross in the sector - scams, outrageous parties, get rich quick schemes - but the underlying technology remains interesting. Crypto has more in common with the dotcom era than the 2008 crash.
Just as 2000 cleared out many of the poor quality projects and paved the way for Amazon, Google and more, so too developers working on blockchain and crypto technology will surely keep marching forward. In fact, many hardcore developers are glad for a correction: it clears out the chancers who gave their work a bad name.
Crypto will succeed when it is invisible, underpinning and enabling tech that we use every day - just as the internet is now part of the everyday fabric of our life.
It could take another decade, it could take longer. It may never happen. But those working to make it a reality won’t be deterred by the latest crash. Ignore them at your peril.
