2022 is coming to an end, 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.
Zhou: “It will not be business as usual for centralized exchanges. For one thing, the days of commingling users and exchange assets are long gone.
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.
We end our institutional round with Wei Zhou; for three years, he worked as Chief Financial Officer at the world’s largest crypto exchange, Binance. Above all, this company and its current CEO, Changpeng “CZ” Zhao, have a lot of influence in the new industry and will continue to exercise influence in the coming years.
Zhou: “Bitcoin, like the Internet, will survive the coming storm; of this I have no doubt.”
Zhou examines the biggest moments of 2022 from a unique perspective. Additionally, he talks about the fundamentals that will keep crypto alive and on the path to fulfilling its destiny. 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: The crypto market has certainly changed a lot in the past year.
Collapse of major industry players
I think the biggest change this year is due to the collapse of several major industry players, from Celsius, 3AC to BlockFi and most recently FTX. With billions of dollars at stake, investors are being cautious. The collapse of the giant has reminded us to be careful and diligent with our crypto investment decisions. Users should do thorough research and stay away from entities whose licensing and regulatory status is unclear. I believe that the situation will change in 2023 and investor confidence will continue, but we cannot forget the lessons learned this year.
Liquidity is affected but adoption will continue to grow
With the collapse of a large market maker like FTX, liquidity in the market was affected as few exchanges relied on it. Investors have also withdrawn money from the exchange which has increased liquidity. Speculative trading may take a back seat, but for those whose crypto is more focused on use cases like value transfer, web3 games and financial inclusion, crypto adoption will continue to rise especially in the Philippines.
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?
This year’s market decline has left crypto skeptics and some mainstream media houses re-energised in the fight against crypto. This narrative cast doubt in the minds of investors. However, most people do not realize that Bitcoin is designed to be a decentralized electronic currency.
Crypto is still the future of finance. If you remember, when the dot-com bubble burst, there were many questions about the viability of the Internet as a technology and the companies that built it. But look at Amazon, Facebook, Google and others today – they are defining the world we live in. This is because, despite changes with market players, the underlying technology is fundamentally transformative. Bitcoin, like the Internet, will survive this future.
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 winter? The mainstream has once again announced the death of the industry. Will they finally get it right?
A: I would point to the FTX collapse as a landmark moment. Its impact has been and will continue to be felt across the industry.
- Investors are more interested in who they trust with their assets and how custodians and exchanges store those assets. Investors are now exploring custody solutions, which contrary to opinion I think is a good direction. When they need to trade assets, they are now keen to work with a fully regulated exchange like Coins.ph which is licensed by the central bank of the Philippines and regularly audited.
- Regulators are more concerned about the industry. We will also see a trend where regulators around the world will start creating a more comprehensive regulatory framework around cryptocurrency.
The crypto industry has seen worse. In 2017, the crypto market peaked and fell to $3,000, and the industry suffered a three-year crypto winter. In 2022, we now have institutional investors advancing in the sector, unlike in the previous winter.
I believe the industry will survive because there are now more use cases than ever before.
Q: What’s next for exchanges such as Binance in 2023 and beyond? Do you think the recent events with FTX will jeopardize the future of the platform? Many have speculated about the shift in liquidity from Centralize to Decentralize Exchanges (DEX) due to the lack of user confidence in the former.
A: The days of commingling users and exchange assets are long gone. FTX has awakened the entire industry to the dangers this practice can pose. Proof of reserve has become a big trend as more investors question how and where assets are stored.
Related reading: Crypto Holiday Special: Past, Present, and Future With Blofin
Regulators are also cracking down on tougher exchanges. In the Philippines, for example, the BSP has rushed to audit exchanges to check if they have been infected with FTX. Fortunately, neither Coins.ph nor our friends were affected by FTX.
The crypto industry will shift its focus to Web3, decentralized exchanges and self-custody. More and more users are now exploring wallets that offer full ownership of crypto. I am a big supporter of custody for people with the technical ability to succeed. When needing to trade, I recommend using an exchange that is licensed and supervised by a recognized national or regional supervisor.
