Let's Separate the Crypto Industry From the Tokens Themselves
The idea for this post originated from a message I saw posted Stocktwits. It was something along the lines of "Coinbase is laying off more employees; this is it for Bitcoin." The post was accompanied with the BEARISH stamp, with $BTC tagged. It's true, Coinbase is indeed letting go of about 950 employees, or 20% of its workforce. But I don't believe, for one second, that the decline in success of crypto industry companies translates to the decline of the price of tokens themselves. Let me explain.
I view the "crypto industry" as the hundreds (if not thousands) of companies that generate revenue indirectly from cryptocurrencies.
This includes exchanges, who profit from spreads on crypto trading, transaction fees for crypto trading. Companies like:
Coinbase
Crypto.com
Gemini
BitMart Exchange
Kraken
eToro
Crypto mining companies generate revenue from the mining of cryptocurrencies:
Canaan Inc.
Hut 8 Mining Corp.
HIVE Blockchain Technologies
Marathon Digital Holdings
Riot Blockchain
Crypto ATM operators make money from transaction fees:
Bitcoin Depot
Coin Cloud
CoinFlip
Bitcoin of America
There has been a lot of negative news on these companies lately. A big risk these companies take on is holding actual crypto tokens on their balance sheets. For when the price of crypto tanks, a given company's reserves quickly shrink. Mining companies have taken a hit this past year, due to rising energy costs and high debt from expanded borrowing in 2021. Coinbase, which is consistently the second most popular exchange by trading volume, has lost 87% of its market value since its direct listing in April 2021.
It doesn't take an expert to realize that a lot of these crypto companies won't survive. Many have already filed for bankruptcy:
Three Arrows Capital
Alameda Research/FTX
Voyager Digital
BlockFi
Celsius
Whether or not the above companies will successfully emerge from these bankruptcies remains to be seen. There are still definitely tough times ahead for the crypto industry. The fact that the prices of major tokens are still depressed does not help them. But, whether or not these companies survive the "crypto winter" is really quite irrelevant for the tokens themselves. The all-time chart of Bitcoin is still bullish, despite being down from its all-time high.
The previous peaks in 2018 and 2019 were followed by consolidation periods, or "crashes" as they were referred to as they were happening. It appears that Bitcoin is in just that now, another period of consolidation.
Another important factor to consider is the upcoming Bitcoin Halving, which is forecasted to occur in March 2024. Halving happens every 210,000 blocks in the blockchain, when the reward for miners is cut in half. The next halving will drop the mining reward from 6.25 BTC per block to 3.125 BTC per block. The Bitcoin Halving Clock explains quite well the history of price action at these events:
In conclusion, I would like to take the time to mention a few crypto companies that have gone defunct, one by scandal and one by hack & list the price of Bitcoin when they went down, compared to now.
Quadriga
Defunct February 5, 2019
Bitcoin closed at $3,466.36
Current price is +402% since 2/5/19
Mt. Gox
Halted operations February 7, 2014
Bitcoin closed at $712.40
Current price is +2,345% since 2/7/14
While certainly necessary for the world of cryptocurrencies, specific companies come and go. I don't believe that the ultimate success of any particular token, if measured by price, depends of how any particular company fairs. Let me go ahead and list one final company here that is fresh in everyone's mind.
FTX
Bankruptcy/withdrawals halted November 11, 2022
Bitcoin closed at $17,055.93
Current price is +2% since 11/11/22