2022 is over, and the Bitcoinist staff decided to launch this Crypto Holiday Special to give you some perspective on the crypto industry. We will talk to many guests to understand the highest level of this year for crypto.
In the spirit of Charles Dicken’s classic, “A Christmas Carol,” we will examine crypto from different angles, look at possible trajectories for 2023 and find common ground among various views of the industry that can support the future of finance.
Ben Lilly: “(…) for the bottom line… Nothing has changed. If anything, builders are building faster than ever. All veterans know that today is the most productive week you can have in crypto. This is a blessing for those who can handle such times.
And now, for the bonus round, we talk to Ben Lilly, Co-Founder Jarvis Labs, an on-chain analytics and token design company that explores the crypto market. Lilly offers his views on the current state of the industry, why Bear Markets should be used as a time to build, and why the nascent class is maturing. This is what he told us:
Q: What is the most significant difference for the crypto market today compared to Christmas 2021? Beyond the price of Bitcoin, Ethereum, and more, what has changed from a moment of euphoria to a constant fear today? Is there a decline in adoption and liquidity? Is the foundation still valid?
A: In December 2021, we discuss whether the US Federal Reserve will follow through with rate hikes in the face of inflation. A year later, what we’re seeing is a strategic push to say we’re going to take two steps, and take three in a hawkish/bearish way. Not only does it damage the market, but it ensures that the market cannot find a solid footing to build momentum.
This mentality led to a rapid hiking regime. The downwind effect of the dollar as a currency is an asset to hold. And most everything else lost value to the dollar.
Many people like to say that Bitcoin, Ethereum, and other assets are “losing value”. This is a misnomer. We price things in US dollars, and relative to the dollar, the asset loses value.
What many people know slowly is that most participants in the crypto market are speculators. This is a bit unfortunate, in my opinion. And something I look to track better with data.
The decline in speculators (and many market makers closing shop) has created a significant liquidity hole. We know about this too. It is very difficult for market makers to run smoothly on some second-tier exchanges because their books are so dry. We know this as well when we start exploring market making since our team has been running autonomous trading systems for half a decade now. Clients are asking us more than ever to create a market, so our team has started this operation for 2023.
As for the basics… Nothing has changed. If anything, builders are building faster than ever. All veterans know that today is the most productive week you can have in crypto. It is a blessing for those who can handle such times. I see some amazing technology solutions today. Our team is currently testing some of them and looks to expand the onchain functionality in the coming months – something we have been exploring for years now. For us, this is proof that the fundamentals of the industry are only getting better.
Q: What is the dominant narrative driving the change in market conditions? And what should be the narrative today? What do most people face? We saw major crypto exchanges exploding, hedge funds deemed impossible, and ecosystems promising financial utopias. Is Crypto still the future of finance, or should the community pursue a new vision?
A: Operations performed onchain are more in demand than ever. Our clients pushed us in this direction, which told us that the distrust, verification mentality became more important. I’m happy to hear this and hope to push everything we do to fully onchain in the coming year.
I will make this up, I would never imagine our team would be looking for zero knowledge technology to run a part of our operation. Simply put, the vision is the same, only more crystallized – a process that will continue to happen as the years pass.
Q: If you had to pick one, what do you think is the key moment for crypto in 2022? And will the industry feel the consequences in 2023? Where do you see the Christmas industry going next? Will it survive this season? The mainstream has once again announced the death of the industry. Will they finally get it right?
A: This significant moment GBTC slides into negative NAV.
As the tides rise in 2022, we know what’s happening in the crypto waters, and we see a lot of blowups coming from Grayscale Trust products.
Three Arrows Capital, Genesis, DCG, BlockFi, Voyager, and others are all associated with the Trust and since the value of the Trust is more than the value of all the outstanding shares (negative NAV), the market dynamics cause the demand point to drop. April 2021.
Time with this and what the US Federal Reserve is doing with rate hikes is like a double-edged sword where both edges point in the same direction. Higher rates and lower spot demand due to toxic Grayscale products means the sword of the bear market is double-edged.
In 2023, I still think some of the worst is yet to come. I don’t have to show the price here. I’m talking about an operation that doesn’t have enough money for winter weather. Revenue is down, newcomers to crypto are down. While I think this is good in a way because it eliminates the business industry that can’t do it, it will cause fear for the industry as companies close their doors.
It will not be the end of the industry from my point of view. Those who have a lot of runway capital. Even those without runways were worked on for years by passionate builders. By the end of 2023, we will see the market come back to life with great excitement. I don’t believe it’s going to be a blown bull market by any means… It’s going to be more about projects launching things that have made us busy this year. You give multiple crypto devs a year to build, the results increase.
Q: And, of course, we have to ask; many claim that the FTX collapse set the industry back to the 2018 bear market. Going back to the days of Initial Coin Offerings (ICOs), to the “Wild Wild West” days of crypto, what do you think of this idea, and where do you think the industry is today? More importantly, what is the role of Jarvis in this context, and what do you want it to be in 2023 and beyond?
A: Crypto is maturing as we all do as we age. You ask anyone who has had ups and downs if they are set back to when they were younger versions of themselves… Most will say they are wiser, and often setbacks how we really realize our potential. Crypto is the same.
We talked before about how onchain solutions are more in demand than before… Well, the industry is undergoing a change in centralized entities like FTX, which aim to make money, and not contribute to the space.
Space will be wiser going forward. And we hope Jarvis Labs can help push this mindset. Our team has been busy across multiple verticals. We have a team building software solutions, new metrics, dashboards, token designs, algorithms, and some other things we’ll be announcing soon. But if I had to stick to one role, it would be to empower everyone to hold crypto to a higher standard. We can be better. Let’s make it better.