Even as creative destruction brings tragedy to people’s lives, there are things to see and learn from the current crypto downturn. LexSokolin writes
The 2022 crypto downturn looks less like a failure to deliver on the promises of an innovative technology, and more like a traditional financial deleveraging across an asset class. The words that people use, like"a run on the bank" or"insolvent," are the same that you would apply to a functioning but overheated financial sector.
I’m definitely not saying Web3 is working flawlessly or fully mainstream. Rather, I am pointing to a systemic financial crunch that has global economic structural causes. Yes, there are bad faith actors who engage in"" and scam, and there are hackers and thieves that break into the equivalent of digital banks. The price collapse is exposing their grift, and in the long run, their names won’t matter other than examples to bookmark a wiggle in a chart.
The machines and robots we are building in Web3, however, are functioning even if their total value locked number melts down. That was not true for Lehman, Enron and other centralized corporate entities, whose bankruptcy proceedings and liquidations took years and years to unwind. Firms, people and DAOs that survive these financial turns change their mental models. Treasuries should not be kept entirely in a proprietary token. Risk management matters most when everyone is ecstatic. Valuation multiples aren’t fundamentals. Leverage accelerates rates of change in both directions. These things are easy to say, but hard to do. Good thing we have no choice but to adapt because here is where we are.
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