From Existential to Irrelevance Risk

Election 2024 coverage presented by
In the early days of cryptocurrency, existential risk was the dominant concern. We woke up in the morning wondering whether some government might ban it, or if some major stablecoin like tether could collapse, or if a major hack would wipe out an entire chain. But as crypto adoption advanced and became more integrated into the traditional financial system, these existential fears have largely faded. Especially with the approval of the ETFs in the U.S., the possibility of total collapse seems very remote.
You’re reading Crypto Long & Short, our weekly newsletter featuring insights, news and analysis for the professional investor. Sign up here to get it in your inbox every Wednesday.
Crypto is not going away.
But the industry faces the next big risk on the way to a maturing asset class: irrelevance. The notion of irrelevance risk might just be the most pressing concern for the crypto market today.
Consider the comparison — however fraught with nuance — between crypto and emerging markets (EM). In the early 2000s, there was immense enthusiasm around the potential of countries like Brazil, Turkey, India, China, and Poland. EM assets were seen as the next big growth sector — remember the BRICs acronym coined by Goldman’s Jim O’Neill? One could walk into a meeting with a senior global portfolio manager and fluently discuss local markets in Indonesia, or politics in Mexico, or the bewildering monetary policy of the Turkish central banks. EM had so much promise, growth potential, and inefficiencies (remind you of anything?)
But, over time, interest in EM began to fade. Now, the sector is often relegated to smaller, more specialized teams, likely comprising a much smaller portion of macro funds’ asset allocation. Now, PMs spend their time on the big fish like semiconductors, AI, U.S.-European rates, and commodity cycles. Why? In short, EM assets just didn’t deliver returns.
Similarly, while there is still a great deal happening in the crypto space — such as bitcoin ETFs receiving inflows, Ethereum scaling solutions gaining traction, and Solana promising a faster, more scalable network — there’s a risk that none of this will translate into sustained growth. Just as EM had moments of brilliance but failed to capture long-term interest, crypto faces a similar challenge.
The good news is that the industry’s success depends more on its own efforts and less on exogenous factors such as regulation. Moreover, there are plenty of potential catalysts to jumpstart crypto’s future. Here is a non-exhaustive list:
Crypto doesn’t need a single breakthrough “killer app” to remain relevant but rather a series of incremental successes across decentralized finance, stablecoins, and innovative blockchain applications. Five-to-ten Polymarket-scale protocols with similar recognition might do it.
The future remains uncertain, but the possibilities for avoiding irrelevance are certainly within reach.
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.
Edited by Alexandra Levis.
Disclosure
Please note that our privacy policy, terms of use, cookies, and do not sell my personal information have been updated.CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. CoinDesk has adopted a set of principles aimed at ensuring the integrity, editorial independence and freedom from bias of its publications. CoinDesk is part of the Bullish group, which owns and invests in digital asset businesses and digital assets. CoinDesk employees, including journalists, may receive Bullish group equity-based compensation. Bullish was incubated by technology investor Block.one.
Ilan Solot is the senior global markets strategist and co-head of digital assets at Marex Solutions.