Crypto Industry Struggles to Recover: Is Another Boom on the Way?

Bitcoin’s recent surge past $30,000 has many wondering whether another crypto boom is on the way. However, the industry is still struggling to recover from the damage caused by last year’s scandal-filled downturn. While Bitcoin’s rebound has brought some optimism, several high-flying startups, including Voyager Digital, Celsius, FTX, Blockfi, and Genesis Global, were hammered by bankruptcies following the collapse of Three Arrows Capital. This has led many to question whether another crypto boom is on the way.

Despite the recent optimistic mood, it’s clear that the industry still has a long way to go to recover from the damage caused by last year’s scandals. Several high-profile enforcement actions have drawn regulatory scrutiny, including FTX’s Sam Bankman-Fried who is awaiting trial on fraud charges. Similarly, Do Kwon, co-founder of the Terra blockchain, is facing prosecution for his role in the project’s collapse. Binance and its CEO Changpeng “CZ” Zhao have been sued by the Commodity Futures Trading Commission for a variety of alleged violations, and Coinbase Global Inc. has received notice that the Securities and Exchange Commission intends to sue the company.

On top of the regulatory scrutiny, the industry has also experienced several setbacks, including the recent failures of crypto-friendly banks like Silvergate Capital Corp., Signature Bank, and Silicon Valley Bank. While these banks were once seen as a bullish catalyst for Bitcoin, their downfall has severed key links to the US financial system, making the future of the crypto industry as uncertain as ever.

Despite these setbacks, progress in the evolution of the industry has continued. Ethereum recently completed a successful upgrade to its network, and the macro picture has changed for the better. A Citigroup research study estimates that as much as $5 trillion may transition into new forms of money, such as central bank digital currencies and stablecoins, by 2030, driving mass adoption of blockchain technologies.

However, the industry is still maturing and realizing that the money tree available a couple of years ago has withered. Thousands of jobs have been lost in the industry, and hiring has not picked back up. Many retail investors are still licking their wounds, and the total value of coins locked into DeFi projects is still a fraction of the $180 billion peak reached in December 2021, according to the DeFiLlama website.

It remains to be seen whether another crypto boom is on the way, but it’s clear that the industry is still in a state of evolution and maturation. Institutional investors will have to weigh heavily on the role crypto is meant to play in a portfolio, considering the long-term history of Bitcoin not providing portfolio diversification. While progress in the evolution of the industry has continued, the industry is still facing regulatory scrutiny and many retail investors are still waiting and seeing.