Calling blockchain and its associated technologies an “industry” is, to some, still an insult. To call it a “sector” is too dismissive, an “asset-class” too reductive. How about: Prophets of a new sacred social covenant? Defenders of libertarian finance? Acolytes of a decentralized faith? Trustees of the trustless? A belief in the wisdom of crowds.
For the longest time, crypto has served as an alternative institution: Whether it’s for finance, art or community, it’s considered a tokenized counter-cultural movement. Permissionless, trustless, decentralized, open, embracing the fringe — a community where everyone is welcome, and no one can tell us what to do.
Yet even the most red-fevered crypto-anarchist must admit by now that the direction of travel is set. Whatever primitive emancipation certain users experienced from the traditional financial system through crypto is fading.
Old money is coming, and global finance is moving on-chain.
The idea that crypto can become a mainstay social force without old money is quaint. Like it or not, these financial behemoths run the world. If there is to be a new on-chain, decentralized internet financial system, then established paradigms of money management that are backed to the hilt by legislative structures have to be involved. It’s by taking advantage of crypto’s unique properties through these institutional structures that will allow crypto’s potential to truly flower.
And even a blind man can see old money’s interest in crypto.
ETFs are a huge gateway drug to this adoption. Crypto has waited with baited breath on the result of applications led by BlackRock and co. Even pension funds are opening to bitcoin, with Fidelity, the largest US-based 401(k), leading the charge. In fact, many believe the accumulation is well-underway and the only reason why we haven’t dropped lower — remember bitcoin (BTC) at $15K post FTX slump? ETFs might signal only the starting gun — not the moon push many expect. That will come later, when every single financial account manager finds they need to offer 5% exposure because everyone else is doing it.
Read more from our opinion section: DeFi has a reputation problem
Has crypto failed to build an alt financial system? Is crypto straight up replicating centralized finance, now even more so by using traditional finance liquidity? Yes and no. Crypto is like water, it adapts to the shape of the glass. Should an institution want to add BTC to its balance sheet, it can — whether through an ETF or via self-custody off a P2P exchange. Should you want to live CEXless and own your coins in kind, you can. The Infinite Machine is now mature enough to take any shape assigned. To some, it’s not about breaking free of Wall Street, but about catering to it. To others, it’s about living the on-chain life.
Then, if TradFi goes all in, what does this world look like?
Soon enough, DeFi TVLs will be boosted by pension fund buy-ins, ticker tapes for derivative baskets of cryptos will roll daily across Bloomberg News and investment shops will let Mom n’ Pop buy indexes that track the entirety of the shitcoin spectrum. Banks won’t just let you buy crypto — they’ll buy it with your retail savings and give you 3% a year.
Eventually, if not imminently, investment banks will trade NFT portfolios over their OTC desks. Some bright young thing in a whip-sharp suit will concoct synthetic CDOs and credit default swaps on tranches of CryptoPunks, and before you know it, grandma’s pension fund will own apes. Ultimately, we’ll all have apes. Or be apes — fractal pieces of ownership in the crystalline structures of global finance. Tokenized assets, mutual funds, ETFs. These indexes that track whole markets have a fungibility and legitimacy that can’t be achieved any other way. They are, in short, what people truly mean when they say “adoption.”
But wait, isn’t crypto replete with problems? Scams, hacks, unclear regulation, the grave freedom that is self-custody. They are problems institutional money was invented to solve, yet crypto solves and does things iMoney only can at great expense and with enormous inefficiency: settlement risk, remittance, HFT, exchange fee handling, dividend payout, payment processing, insurance arbitrage. The list is as long as the financial service sector itself.
An influx of retail money channeled through financial scions will create the predictable yields that let innovation truly prosper. Everyone will take mainstream finance crypto projects seriously. Innovation will, newly minted, go into overdrive. A whole cabal of investors, entities that sit currently outside the angel and VC edge cases that are the current primers of any crypto run, will be looking for Web3 projects to make sustainable, long-term investments in.
Crypto, whether you like it or not, is going to become an industry, and — if it truly proves the widespread utility it has claimed, especially as scaling challenges are met and bad actors are flushed out — might be all the better for it.
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