The turbulence of crypto teaches hard but no new lessons

The luck favors the brave, such a crypto exchange, Crypto.com, in a commercial that is moderated by basketball lebron James. It was part of a crypto advertising blitz during the Super Bowl in February when the industry sprayed on segments supported by celebrities who would reach more than 200 million viewers. Crypto has really arrived in the mainstream. Four months later also high losses, since the war in Ukraine, the creeping inflation and general market fears have tamed the animal spirits.

This week alone stopped a large crypto exchange, Binance, briefly Bitcoin withdrawals, and Celsius, a loan platform, blocked returns. Meanwhile, Crypto.com, which may not feel so brave, announced job cancellations, as well as a listed rival, coin base. The value of Bitcoin has temporarily fallen from his November high of $ 68,000 below his "realized price" of $ 20,000-which means that the average buyer has lost money.

For many it was a hard lesson that they had to learn. For some, the lesson was changing life. In South Korea, additional police have been sent to patrol since the collapse of a so-called algorithmic stable coin, Terrausd, additional police to patrol the Mapo Bridge in Seoul. But it is not a new lesson: fear and greed are strong motivators, and even assets with low eigenvalance will increase in price if there is sufficient demand, be it tulip onions or cryptocurrencies. Or, as Bill Gates put it this week: cryptocurrencies are "100 percent based on larger fool theory".

For other, including large macro investors who bought themselves in crypto, the fact that it is a speculative, highly volatile bet is the jumping point. But since the willingness to take risks this year has decreased, the removal of crypto is a simple step. Of course, this has worsened the decline of crypto and is most felt by inexperienced investors.

The latest turbulence have made the demand for protection of these armchair investors louder. Of course, those who sell false promises should be outlawed as they would do in every industry. Token that are probably securities but do not correspond to the existing laws are rightly exposed to the anger of the market guard. But many taxpayers would resist the idea that they should save others who have relied on risky assets that were accompanied by consistent warnings. Unfortunately, an apprenticeship for the supervisory authorities is that their health warnings around crypto cannot keep up with the recommendations of Hollywood actors or football clubs from the Premier League.

The risk of widespread losses-and the overflidation of crypto turbulence into the real world-is sufficient that some guardrails are required. In the United States, Great Britain and the EU there have been some progress in the development of framework works, despite internal territory and concerns that the complication of the current simplicity of a largely unregulated, unprotected product could have its own unintentional consequences. But how can a phenomenon that is everywhere and yet nowhere can be properly regulated? The decentralized structure of crypto is designed in such a way that it is outside the range of national governments - depending on the point of view, a red flag or a libertarian destination.

A beginning would be to concentrate on where crypto and fiat currencies meet, namely stable coins that claim that real assets are underpinned so that retailers can safely park their money between bets on volatile coins. This promise must be checked and stable coins should be subject to capital and liquidity requirements. But if it is not acted in step worldwide, little will be achieved to control an online industry that operates across borders. Until then, investors should remember another saying that the crypto industry has not promoted: If it looks too good to be true, it is probably the same.