Exploring the paradoxical rise and uncertain future of crypto
The last 18 months have transformed cryptocurrency. Its growth has been faster than ever, yet its future has never been so unclear.
Flush with time on their hands and few activities to spend money on, many consumers have forayed into crypto trading for the first time during the pandemic.
Everyday consumers, many not sure exactly what the blockchain is, followed the viral trail of Reddit threads, where talk of “stonks” and “diamond hands” pushed thousands to collectively inflate the price of certain assets “to the moon”. This led to a whole new category of “meme stocks”, breathing life back into defaulting companies like GameStop and AMC, and shaking the market to its core.
This all leads to one big trend. Cryptocurrency, once only understood among a relatively fringe community of anti-establishment investors, is now becoming a household name – and quickly. Analysts estimate that the global cryptocurrency market will more than triple by 2030, hitting a valuation of nearly $5 billion. Whether they want to buy into it or not, investors, businesses, and brands can’t ignore the rising tide of crypto for long.
But crypto can’t seem to escape paradoxes anywhere. Investors believe in regulation, yet are worried about many of the impacts that regulation will bring about. They’re eco-conscious, but crypto has a huge carbon footprint.
Digging into these nuances is key to understanding overall consumer sentiment – and predicting consumer behavior – around a very uncertain future of cryptocurrency.
Alongside corporations entering into the market, crypto trading and mining has caught the eye of government overseers like never before.
Since the invention of bitcoin, governments have done relatively little compared to traditional investment categories to regulate or moderate the market. For the most part, cryptocurrency has been allowed to spread around the world as a uniquely decentralized financial asset.
Now, the laissez-faire attitude toward decentralized finance is waning. Perhaps surprisingly, investors are actually supportive of new regulations, though they have quite conflicting views about what these policies could mean and who should create them.
% who say they support/oppose government regulation of crypto
The details of what government oversight will look like, however, matter a great deal to investors.
On the one hand, many investors believe greater regulation could legitimize the fledgling marketplace – enabling more businesses to accept digital currencies, increasing their value and security from fraud, all while reducing volatility and criminal activity.
On the other hand, many also worry cryptocurrency regulation could effectively limit its peer-to-peer nature, which drew initial investors in. They also see drawbacks to crypto regulation as a potentially larger threat, not just to their wallets, but to the individual freedoms they currently experience in the decentralized and anonymous marketplace.
% who say the following are the biggest benefits/drawbacks of crypto regulation
The paradox here lies in the difficult balance between wanting regulation, and fearing the loss of the fundamental character of crypto that would result from that very regulation.
Regulation offers protection and stability; while crypto has thrived from volatility and anonymity. But currencies can’t operate without being regulated, especially not to the scale that crypto has reached.
Finding a middle ground between regulating a lawless commodity and allowing it to continue to build value will be a challenge for governments, coin exchanges, and investors alike.
For this reason, support for regulation is directed not toward governments, but toward payment companies and exchanges themselves. While many consumers are mistrustful of industries that are allowed to self-regulate, in this case they see it as a potential solution to the unique risks of crypto regulation.
% who say they trust the following institutions most to lead the regulation of crypto
While this does not reflect well on consumer views of their government, it does bode well for brands. Building trust and credibility in the crypto space is, in the eyes of consumers, easier if you’re not a government entity. Perhaps this reflects the anti-establishment ethos of crypto’s early culture.
Either way, it certainly presents opportunities for brands in technology and related fields to become a trusted partner, educator, and safety net – swooping in to fill the gap where governmental trust is lacking.