Crypto’s Rout Doesn’t Mean It’s Going Away

The crypto crash has intensified into a furious holy war over the legitimacy of web3. But first…

Today’s must-reads:

• Not all tech stocks have melted down this year
• Who’s losing money in the crypto rout
• European delivery giant Gorillas is discussing a sale or a merger

We’re not through with web3
It’s pretty much open season on web3 evangelists and their poorly articulated attempts to illustrate the technology’s applications. Last week, venture capitalists Marc Andreessen was roasted online over a three-minute video clip in which he clumsily discusses how the decentralizing technology might help podcast hosts make a better living. Similarly, Reddit critics piled onto investor Packy McCormick’s effort to frame the blockchain’s utility for real estate investments and mortgages. And YouTube commenters continue to flambe this unintentionally hilarious 20-minute advert for a proposed island community called Cryptoland, which featured a nightmarish talking Bitcoin (“Hell is real,” reads the top comment.) And on and on.

The fury goes well beyond the predictable told-you-sos from members of Peter Thiel’s so-called “financial gerontocracy,” like Bill Gates, Warren Buffett and Jamie Dimon. It’s also taking on the dimensions of an ugly political campaign—with selectively edited clips and the most awkward presentations tweeted to inflict maximum embarrassment on the proponents of a tech trend that, by all accounts, is still in its infancy.

There are a few obvious reasons for all this public vitriol. It’s an expression of several years of pent-up frustration toward the hubris of the crypto classes, as well as the exasperation of watching jargon-spewing, self-styled thought leaders, mostly under the age of 40, accrue generational wealth in a blindingly short amount of time. There’s also the pure schadenfreude of watching the equally brisk collapse of crypto currencies like Bitcoin (down about 60% since the start of the year) and the valuation of companies like Coinbase Global Inc. (down 80%).

Added to this mix is also a seasoning of moral outrage, since ironically the pain from falling prices has been far more decentralized and widely distributed then any of the technology’s putative benefits. Crypto schemes are widely accessible to the general public of course and, goosed by ubiquitous advertising, have triggered the gambling impulse of millions of gullible retail investors. Pain in the crypto markets also threatens to spill over into the broader economy and, along with inflation and war in Ukraine, spin us into recession, costing “many non-foolish people their jobs and savings,” as the writer David Frum tweeted last week.

In certain respects, it reminds me of the visceral anger over the first dot-com crash. Back then there were also ever-present commercials, unproven business models, and a clear path to ensnaring retail investors, via easy initial public offerings. After the internet economy collapsed in 2000, there was a strange sense of relief outside Silicon Valley—a feeling that maybe the painful disruption threatened by the internet wouldn’t come to pass after all, and that things would return to a safe, analog normalcy. That sense of comfort, of course, proved to be wildly deceiving.

For now, you can be excused for thinking that any kind of web3 future is still far off. There are still way too many prominent examples of crypto chaos—like Axie Infinity, the play-to-earn nonfungible token video game that, as my colleague Josh Brustein wrote last week, has become “validation for crypto skeptics who believe web3 is a vision that investors and early adopters sell people to get them to pour money into sketchy financial instruments.” Or Solana, the so-called “hybrid blockchain platform” on which many web3 applications, including decentralized finance tools and NFT marketplaces, run. It has suffered 12 serious outages this year and its SOL crypto token is down 80%.

So the web3 naysayers are going to have their fun. They’re looking at crypto’s cratering market cap as the ultimate validation of their views. But in tech, these stories rarely end; there are always new chapters. Web3’s true believers just have a lot of work to do to prove their critics wrong.

The big story
Even crypto believers are turning against each other.

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