Grayscale’s victory in its spot Bitcoin Exchange Traded Fund (EFT) case yesterday immediately boosted the price of the dominant crypto by 7%. The value of the whole cryptocurrency market jumped up 5%, while crypto-exposed stocks went wild. Marathon Digital alone rallied by 30%, the numbers far from the typical few percentage volatility range in stock markets.
The solution has already been named historical for its influence on the cryptocurrency market’s future. But crypto spot ETFs are not enough to spark a new cryptocurrency market bull rally, says Lars Seier Christensen. He is the Danish visionary who co-founded an online trading platform in the very early days of the internet bubble and grew it into Saxo Bank after the catastrophic dot-com implosion of the early 2000s.
The entrepreneur, investor, and co-founder of Concordium Layer-1 blockchain talks to DailyCoin about the parallels between the current cryptocurrency market and the dot-com bubble and what is truly needed for a massive future bull rally.
ETFs Lack Transformative Power
“I think we may overestimate a little bit the impact of the ETFs,” says Christensen, who speaks from 30 years of experience across the banking and financial sectors.
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He says that ETFs may act as the catalyst, especially if the biggest players like BlackRock get exposure to digital assets without directly owning and storing them.
“That would open for institutions to get more involved in the space because it’s so much simpler. It would be within a regulated environment that they could be comfortable with and where the risk would be technical problems carried by the issuer.”
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However, he is skeptical about whether the institutional exposure to digital assets will have enough potential to trigger a further cryptocurrency market rally.
He states that there is no urgency for institutions to get involved anymore. Bitcoin’s price is far from the strength it showed during the past bull rally when institutional investors joined the bandwagon motivated by fear of missing out on the opportunity.
Christensen also notes that we should remember that, while ETFs are a big subject in the US, Europe has already had about 150 crypto-related exchange-traded instruments for four years.
“The futures markets haven’t been particularly successful. Even though they are run by organizations that know exactly how to run futures markets, it hasn’t really taken off. So it would be a benefit if you got those kinds of vehicles, but whether it’s going to completely transform the industry, I’m not sure,” adds the investor.
General Interest Shifting Away?
Markets move in the same logic, and history usually repeats itself. Christensen refers to the dot-com bubble, the speculative frenzy during the late ‘90s, when the excessive optimism about the potential of the emerging internet technology sector rapidly inflated company stock prices and led to a massive crash in 2001, with three-quarters of value wiped from the market.
“It’ll be hard to rebuild that deep speculative interest from the retail sector because it tends to run for a certain period and then disappear.”
People look for new exciting investment options that come into the spotlight. This is how bubbles form. They start putting their money in, triggering further enthusiasm and price rallies. This further inflates the bubble. After it bursts, those impacted take time to lick their wounds and search for new promising opportunities.
History shows that this has happened many times before, as money moved from options trading to forex, from forex to crypto, and now, to a large extent, toward Artificial Intelligence (AI), Christensen claims.
In his opinion, for many blockchains, crypto became more of an accessory to make it work and something to pay for transactions to incentivize people to support the system rather than focusing on real world use cases.
“It took on a life of its own and became a dominant feature of new blockchain projects. And a lot of speculation went into it.”
But after the bull rally, the mass interest vanished. The experienced investor believes it is highly unlikely that heavy retail trading volumes will return to the crypto market.
People normally need 18-24 months to regroup, forget about the past, and prepare for another bull rally, on a precondition that there is something new and exciting to chase for, Lars Seier Christensen notes.
“I find it a little bit difficult to see what trigger makes this next sort of big excitement. When the time is right, the story shows up. But I don’t think the time is quite ripe yet. And in the meantime, you have to keep an eye on sectors like AI that might drive that group of traders away from crypto. So I don’t see an underlying rationale for a big rally at this point.”
The Concordium CEO confidently predicts that “AI is going to end up in a massive bubble as well.”
Positive About Blockchain Rally
However, this does not mean that the experienced entrepreneur and investor is negative on blockchain. On the contrary, Christensen is a big believer in mass blockchain adoption.
“I see an almost unbeatable increase in corporate interest in blockchain. People that can see that this could help their processes, they would like to understand it better,” he notes, adding that solid, understandable, and amendable regulatory clarity would be a critical precondition for institutions to adopt the technology.
At the end of the day, mainstream blockchain adoption by corporates and by underlying use cases that help to secure assets or functions should be a game changer, Christensen firmly asserts.
“The next rally will be driven by people that deliver usage and adoption and real use cases that make sense.”
The investor anticipates that it will be primarily new projects and a few already existing ones with the “right idea all along” that will drive that next rally.
But there is no reason to suspect that fluffy projects hyped a few years ago will repeat their hype. “There is no substance to it, it’s not going to happen.”
Utility: The Key to Success
Christensen is convinced that the projects that could lead the next rally will be the ones that comply with regulatory standards and add a level of security that the internet is missing.
With the rise of AI and deepfakes, Concordium’s blockchain founder names data security and the ability to make things provable as the essential use case for blockchain that can be deployed in numerous ways.
For example, real-world asset tokenization is a major use case that the financial sector will likely adapt once regulations are in order. Similarly, projects relating to provenance with logistic change or those about providing the ability to authenticate our digital actions in virtual worlds are likely to succeed in his view.
The investor believes that finding models where we can trust each other immediately could be a game changer and lead to innovative use cases hitherto unseen.
“Just like the internet back in the ‘90s, it is difficult to predict the killer apps. But at that point, nobody had foreseen social media and all this stuff. These things come as the technology allows it. So, I remain very bullish on blockchain as the infrastructure tool, but the crypto markets have to be driven by actually delivering some value rather than just hype and fluff.”
Check out more about Grayscale’s Bitcoin ETF:
How Grayscale’s Transformed Bitcoin Trust ETF Will Work
Learn more about crypto mining issues in the United States:
Can Noise Pollution Halt Crypto Mining in the US?
