Edition 9: Is Crypto Dead?

This week we need a disclaimer. Everything you read here is opinion on news. Schelling Joint does not recommend that any cryptocurrency should be bought, invested in, sold, or held by you. Do your own research and due diligence and consult someone much smarter than us before making any investment decisions.

Crypto Zombies

What a time. $ETH dipping below $900, and $BTC momentarily under $18,000. Collapses combining with service outages, and a stream of negative media articles. Some suggest that the worst macroeconomic forces are yet to land, though perhaps the pricing of some investments, like crypto, have these impacts pre-baked in.

But what does this really mean? Is price-level really an accurate indicator of the health of a growing industry? And most importantly for us: what does all the chaos infer for regen?

Lets find out. In this special edition of SJ, we summarise the craziness and suggest a way to think about a more stable future, especially for regenerative cryptoeconomics.

The Craziness

The state of play: first off we have the macroeconomic environment. That’s obvs 💩, for most people, and gladly its off the table for this week’s SJ. Needless to say, Autumn 2020 – late 2021 feels like a long time ago. For crypto, the spirit of this moment in time seems to be characterised by three types of event: (1) liquidations, (2) disruptions, and (3) media.

Liquidations

What came first? Its hard to know what was the beginning in the last round of capital depletion events. We had $OHM lose 93% of its value, and attention (then contagion?) spread to the Wonderland DeFi ecosystem.

Then seemingly sparking the latest tranche of devaluations, the collapse of the Terra/Luna system after its forced depegging, and now the Celsius/3AC shockwaves have sent sentiment down to what Milk Road rates as ‘Extreme Fear’, creeping off-chain and into IRL finance in the process. The crisis in Solend looks to be just the latest iteration of market terror.

All this gets met with the usual crypto-maximalism, obvs:

Disruptions

If you believe the noise, crypto isnt really ‘working’ at the moment. A wave of outages seem to have taken the cryptoverse by storm. Though its debatable how many of these disruptions were business as usual in the last bull market, and we are just hearing about more of them now while noise around blockchains turns generally negative.

Media

And on that note, why are we hearing so much? Well sometimes, such is the volume of negativity after a crash, it can seem like (and this is no accusation, really) journalists are stockpiling negative articles, and timing them for when sentiments are down. On the flipside, someone needs to stand for the people getting liquidated, and institutions of free press taking that fight will be seen as welcome, for many. Especially where the articles draw attention to genuine scams.

Accusations of other sorts are coming thick and fast too, and not just from traditional media outlets. Some users and contributors are questioning the fairness of DeFi to contributors, and the growing drain of degen tendencies on the technology itself. Not to mention, the NFT NYC conference is apparently afire (and undoubtedly, soul-searching) with the accusation that Bored Ape Yacht Club is actually the biggest internet troll in history, turning meme to LARP in a plot to bring white supremacy into mainstream Web3 via the $1Bn project.

Beyond Price to Impact

It's tough out there right now. If you’re a crypto investor, big or small, there are probably very few safe places for your cash to grow. True, prices are low, so could represent a good buying opportunity. But no one is sure how hard this next phase will be, how low values will go, and how long for.

But hold up a minute. Prices… SJ: isn’t this a regen newsletter guys? Why does this matter to us? What’s crypto for anyway?

You’d be right to ask. So, let’s explore.

We can start with the question: ‘should market prices should ever be an indicator of success, especially in regen, and if so, what kind of market price movement would we want in a healthy ecosystem?’ It’s the urgent question in regen, IOHO.

In a super informative and thought-provoking post this week, Mike McDonald asks all crypto investors the question: is the tech ‘working’? And goes back to the idea of original mission, to answer.

Using $BTC as the example, Mike asks us to consider if “price failure” is really a failure at all, when weighed against original mission:

Mike’s example is great, but it leads us to rethink his original infographic and maybe redefine ‘success’ and where it sits in the quadrants. What we think regen needs (‘wants’ perhaps?) is stability. So, if we were to build that into a new formulation of Mike’s table, it would look something like this:

Here’s why this works. Mission comes first. Price rises are no longer success criteria. Just stability. The project can inhabit more of the quadrants – mission-based squares – and still be deemed a success because it achieves its originally stated ambition for impact.

We get this from removing the expectations of outsized returns for investors. Instead, stable and predictable returns become the driver.

What’s better about this? Well, steeply climbing prices promote degen tendencies (like FOMO), lock users out, and create concentrations of wealth at the top. Whereas declining prices, on the other hand, depress interest, disincentivise any risk-taking, and create liquidity issues.

Negatives of High Prices

• Users locked out by the high costs of entry

• Concentrations of wealth at the ‘top’

• FOMO

• High transaction costs

• Higher risk-taking

Negatives of Low Prices

• Depressed interest

• Risk aversion

• Liquidations

• Less funding

• Short project runways

A future in which regen coin prices are both stable and decoupled from the wider moves in the crypto space may be utopian, but it’s the ultimate ideal-type indicator that the regen moment has arrived. It’s one in which the predictability of that market itself benefits investors, of course, but more importantly bakes in reasonable expectations of returns for the public goods these projects are built to serve.

What this means for regen coins, we think, is leaving behind potential high-price growth as a denominator of success and moving towards price stability and incremental growth as an indicator of regen buildability.

‘Is Crypto dead?’ we asked. *No, it’s not. But it has lost its way. The imagination behind the potential of this technology is where we need to reallocate our attention. And an impact-mission mindset helps us to think about how we want to emerge from this bear market into the next upward cycle.