Crypto Infrastructure Hanging By A Thread
Get your digital coins off Coinbase (COIN) asap. That’s the big takeaway of another crypto platform freezing.
I told you this could happen again, and it did.
This is yet more unwanted optics for the digital gold and its pitiful infrastructure whose bellwether coin crashing down to $19,500 has kicked up an avalanche of system risk.
This asset class simply will not have a future if crypto exchanges, lenders, middlemen, stablecoins, and the broad network just freezes after customers want their money back.
We need to put this under the category of not good enough.
Delivering back funds upon a requested withdrawal is the cornerstone of trust for any industry.
Crypto is failing miserably at basic safeguarding of funds and they have nobody to blame but themselves as crypto lender Vauld on Monday paused all withdrawals, trading, and deposits on its platform and is exploring potential restructuring options.
The shake-out is clearly not over and it’s really who’s guess to which crypto company is next.
Vauld CEO Darshan Bathija said on Independence Day that the company is facing “financial challenges” due to “volatile market conditions, the financial difficulties of our key business partners inevitably affecting us, and the current market climate” which has led to customers withdrawing more than $197.7 million from the platform since June 12.
Many future investors won’t invest in any crypto risk assets if the CEO says one day everything is perfect and a few days later the platform is down.
It’s flat out misleading.
This is certainly a black eye for the “decentralized” thesis that has morphed into a money confiscation operation which will damage long-term trust and accountability of the asset class.
In the next bull market, if there is another one, many investors will remember when multiple lenders and exchanges froze funds when Bitcoin went down in price.
So apparently these platforms only work for the customer if crypto is going up.
The ridiculousness then leads to investors to question at what percentage sell-off is their crypto broker going to pull the rug and screw them over.
This is why many conservative investors gravitate towards regulated market with cash flow which crypto certainly is not.
Also, insurance is another massive failure precisely because it’s unregulated.
This will ostensibly turn into a big negative feedback loop with systemic risk attracting government regulators causing Bitcoin to drop further and then inviting another wave of regulators on top of the first round of regulators.
Who wants to be a part of that circus?
Pushing the false narrative that regulation is akin to communism and that centralized money is the worst thing out there has really come back to bite the crypto community.
The industry was clearly overhyped when it didn’t need to be.
Crypto clearly needs a reset after many of the companies that surround the ecosystem are in panic mode because of insolvency issues.
It’s almost as if the only thing working is Bitcoin itself and nothing else.
Just like the health and military crises which really exposed the thoughts and values of individual people, the rise in interest rates has exposed crypto as not as good as first advertised.
