Last night, an unknown assailant wiped $8 billion off the total cryptocurrency market cap, adding up to an 80 percent drop since January’s vertiginous highs (“Worse than the dot-com crash,” surmised Bloomberg). Though Bitcoin suffered losses of only 1.2 percent, altcoins, now largely shitcoins, took the brunt of the damage. The market took no quarter. Ether sunk by 11.85 percent ($195 to $172), Bitcoin Cash by 10.91 percent ($470 to $420), Litecoin by 9.48 percent ($54 to $49), and Cardano by 13.08 percent ($0.07 to $0.06). Only Tether saw any gains, which means nothing, since it’s pegged to the dollar. ‘Twas as if millions of altcoins suddenly cried out in terror—and were suddenly silenced.
So whodunnit? Was it the U.S. Securities and Exchange Commission? Hmm. The regulatory body on Tuesday did impose a $200,000 fine on Crypto Asset Management, a crypto, er, asset management firm, after it “misrepresented” itself as the "first regulated crypto asset fund in the United States.” The SEC also punished Token Lot, a so-called “ICO Superstore,” for flogging unregistered securities. But low-calibre crypto-scams are shut down all the time.
Could it have been the International Monetary Fund, with its avuncular worldliness and unbending commitment to “secure financial stability”? Admittedly, the Fund has no alibi, given that it spans 189 countries, all at once. And there is a smoking gun—on Tuesday the body advised the tiny Marshall Islands in the Central Pacific not to introduce a cryptocurrency as a “second legal tender” alongside the U.S. dollar, citing an “absence of adequate risk mitigating measures” that could alienate U.S. banks. But could the ignominious fate of a near-unknown cluster of tiny islands really have knocked $8 billion of a massive global market? Seems unlikely.
Tea-leaf sifting has begun in earnest. Ethereum inventor Vitalik Buterin, who on just Monday foretold last night's calamity, explained that any further increase in crypto's value would stem from "actual usage" of blockchain technology, whose role as a store of value he declared as effectively over.
Mercifully, innovation does appear to be edging in this direction. A new contingent of “buidlers”—a painfully un-pronouncable alternative to “hodlers”—have begun to stress the importance of building blockchain projects over clinging on to crypto-assets like the sepia-tinged memories of a distant romance. Take Brayton Williams of BoostVC, a company that funds “distributed app” development, who has recently called (unsurprisingly) for more distributed apps. Or the Switzerland-based and recently Forbes-approved Etherisc, which one day could provide corruption-free insurance to victims of natural disasters, like the incoming Hurricane Florence.
A newly formed lobby group consisting of several major blockchain companies—Coinbase, Circle, Digital Currency Group, Polychain Capital, and Protocol Labs—may compound these advances. The “Blockchain Association,” as it is called, sells itself on the grounds that it “welcome[s] regulation.” This renewed willingness to embrace regulations and foster innovation could, conceivably, help sluice the juices of vitality over old lady market capitalization’s cold, dead, decrepit face. But this time, she’ll come to her feet without a couple thousand shitcoins dragging her down.