In an article published in the latest edition of Diar, Jack Palmer, the Dogecoin (DOGE) founder, takes issue with the institutionalization of cryptocurrencies. He finds it paradoxical that crypto investors are now literally begging for Wall Street institutions to take over. This can be seen in the excitement in the entry of the Bakkt futures, and custody services by institutions like Coinbase. Jack states that,
While many cryptocurrency enthusiasts express blind enthusiasm at the notion of positive price impact associated with this money flowing in, it’s important to take a step back and analyze what this phase of the cryptocurrency lifecycle actually represents, and how far it lands the movement from its original goals.
Jack is right, but then, anyone in the market long enough could tell that this was bound to happen. Reason? The 2017 pump and resultant 2018 dump. While hardly ever interrogated, the 2017 pump destroyed the whole idea of crypto as a source of freedom for the masses. It changed the demographics of crypto completely. Most of the people who were in early, and who believed in the tech, sold at the December high. The pump was just too extraordinary for anyone rational enough not to sell. If you bought bitcoin at a few cents and you suddenly have thousands of coins each worth $20k plus, it’s hard not to cash on this instant and largely unexpected wealth. The early adopters were replaced by a new demographic of investors who knew very little about the tech but were drawn in by the skyrocketing prices and the media attention that cryptocurrencies were getting at the time.
Now that the bubble popped, the majority of investors who have no association to the tech, and are holding bags, are desperate to earn their money back. This explains the excitement around Wall Street’s interest in cryptocurrencies. Investors are hoping that Wall Street money could bring back a 2017 kind of boom. It also explains why most crypto price analysts base their future predictions on the 2017 high. Ultimately, the entry of institutional money will turn crypto into just another asset class that is fully controlled by big money. The “freedom for the people” part of it is gone. The next wave of crypto growth, with the entry of derivatives will mostly favor the financially savvy and the wealthy. Days of believing in the tech may be long gone. It’s now the age of bots trading against each other, to squeeze as much value as possible, out of every price movement.