The ‘Casinofication’ of Cryptocurrency
Since the inception of Bitcoin and cryptocurrency in 2009, there have always been critics: those who believe there is no inherent value or use case to these digital tokens. These crypto curmudgeons criticize myriad qualities of the ecosystem, often believing that investing in cryptocurrency is no different to gambling. However, in my opinion, critics form these beliefs from a lack of understanding. This space has the ability to revolutionize the world around us, and we must understand and nurture that potential. Decentralized finance and cryptocurrency give the power back to the people, which has become more relevant than ever in recent years. Sadly, for now, cryptocurrency is frequently used as a speculative vehicle which many perceive as a ‘get rich quick’ scheme. As we approach mass adoption, cryptocurrency will graduate from its casino infancy into an asset class which is here to stay…
Indeed, cryptocurrencies are often touted as speculative assets with little to no use case or value. Vast price fluctuations unlike anything we see in traditional markets only further this bias, with opposition condemning the market as a manipulated mess that allows market makers to use these speculative vehicles to run up their account balance whilst sapping yours. But, this is all ill- founded opinion – the cryptocurrency market that we observe today is still in its infancy. Having said this, it is undeniable that bigger players or ‘whales’ have the ability to move markets. However, as the ecosystem develops and the markets mature, whales will have less ability to manipulate prices in their favour, as the capital to do so will be incomprehensible when individual projects have market capitalisations in the trillions of dollars. You could, in some ways, consider trading cryptocurrencies for those who lack experience similar to a casino where the ‘house always wins.’’
Additionally, the ‘casinofication’ of cryptocurrency is magnified by derivatives platforms encouraging and normalizing beginners with no prior experience to use leverage for trading. Furthermore, platforms such as Binance have been guilty of facilitating scams and rug pulls on Binance Smart Chain, their own blockchain network built for running smart contract-based applications. It goes without saying that exchanges offering leverage of 100x to beginners with no trading experience is a recipe for disaster. This would be the equivalent of a casino offering a first time poker player a seat at the high stakes table with his minuscule buy-in. Is there ever any situation where this ends well for the individual? The argument against the casino aspect of crypto is not helped by the recent moonshot coins such as Safemoon, which provided users with unfathomable multiples of their account balances in a relatively short period of time. Since the release of Safemoon, there have been thousands of projects aiming for similar heights, leading token holders into a false sense of security before their ‘guaranteed moonshot 100x gem’ loses 95% of its value in less than a day.
Furthermore, we can’t discuss tokens with no inherent value doing huge multiples without mentioning the grandfather of them all: Dogecoin. Founded in 2013, Dogecoin has been (for better or worse) the onboarding vehicle for millions of impressionable speculators looking to ‘earn’ a quick return on their investment. As much as it pains me to type this, at its peak, a single Dogecoin was worth $0.73, with a market capitalization of $85 billion (yes, billion with a b). At the time, this gave it a market cap higher than every single cryptocurrency token in existence, aside from Bitcoin and Ethereum. When the coin with the third biggest market capitalization is a satirical token featuring the face of a Shiba Inu from the infamous Doge meme, it is hard to refute the opinion that crypto’s primary use case is as a speculative casino. It is extremely unhealthy for the ecosystem as a whole that if you were to ask passersby about their knowledge of cryptocurrency, more often than not Dogecoin would be their first reply. How is a potentially world-changing technology supposed to gain mainstream traction when its most popular project is a coin that was started in 2013 as a joke between two engineers to mock the speculative nature of crypto as a whole?
In fact, when it comes to these legitimately speculative assets with little to no use case, I am extremely pro-regulation. The only contribution these ponzi tokens make to the ecosystem is delegitimizing it, whilst simultaneously magnifying the casino aspect of crypto. At least to me, it is glaringly obvious that regulation is a necessity for the long-term health of this rapidly evolving space.
Recently, we have seen a purge on access to leverage across different exchange platforms, with Binance, the world’s largest cryptocurrency exchange, at the forefront of the regulatory scrutiny. As freshly as last week, Binance announced that they have “officially halted futures and derivatives products offerings across the European region.”This was most likely due to the ongoing pressure being placed on the Cayman Islands incorporated exchange from global regulators. Truth be told, it is very likely that the clamping down on Binance is only the tip of the iceberg, with increasing regulation across centralized exchanges feeling somewhat inevitable across the board.
Although in the near term, this may seem like the end of the world for crypto, regulation on accessibility to leverage trading is absolutely necessary and bullish long-term. To be regulated clearly adds credibility to an industry. In this case, it also protects the consumer’s money, disallowing them from engaging in trading on leverage some of the most financially volatile assets in existence. This consequently negates another feature of the casino aspect of the cryptocurrency space, further legitimizing the industry whilst removing an element of risk for the consumer.
As the wild west of crypto trading slowly begins to be outlawed, there is undeniably going to be a huge shift in popular trading platforms from centralized to decentralized, taking the billions of dollars in daily volume on-chain. Decentralized finance allows for completely decentralized protocols to be born that not even the engineers behind the protocols can stop. Without a doubt, decentralization is the single most important aspect of cryptocurrency as we move forward.
All things considered, there are undeniably aspects of gambling when it comes to dealing with cryptocurrency. Nevertheless, as the space matures and regulatory bodies begin to concretely define their interventions, revolutionary projects with real world potential can take off. Over time, this will lead to increased adoption and acceptance of cryptocurrency in the world, as opposed to the scoffs and tutters heard when crypto is brought up in present-day conversations.