• Only through reconstruction of our financial and social systems can mass adoption be granted.
• Financial institutions have acknowledged the existence of cryptocurrency and backed them.

“Too big to fail” is a theory about the stability of our financial system. The crypto market and Bitcoin share a common flair for their ability to change society from the inside. However, the fundamental beliefs of crypto maximalists have been defied by economists challenging the very nature of crypto’s success – mass adoption. Is crypto able to compete in centralized financial market if mass adoption cannot be achieved?

Technological Adoption Cycle

The ability to use new technology on a wider scale isn’t dependent on the availability of alternatives. Bitcoin was first introduced in order to allow for payment, but failed to get traction. Arnhem Bitcoin City allows Bitcoin payment, but there are no Bitcoin users.

A technology as “disruptive” as Bitcoin does not attack business models; instead, it restructures the economic and financial playing field. A Harvard Business Review piece notes that as a “foundational technology,” cryptocurrencies will have an “enormous” impact on the economic and social systems. Still, it can take “decades” for the systems to be integrated into our behavioral structure.

The authors argue that it took “30 years for TCP/IP to move through all the phases” and restructure the global economy. However, access to large information flows is detrimental to crypto’s adoption and market acceptance process because media reshapes an individual’s attitude towards cryptocurrency, ultimately influencing regulators’ activity.

Crypto-Non-Grata

Crypto’s atypical market behavior made Paul Krugman, economist and Nobel prize winner, argue that cryptocurrencies need to make a global usability statement or “give up as a nonstarter,” claiming that despite its allure they are not becoming embedded into the “fabric of society.”

Because their fundamental value is not consistent with any existing economic model, cryptocurrencies cannot be used as a standard financial currency. This could lead to a crisis for the Global Economy. Bitcoin started as a response to financial uncertainty to regain control over one’s financial assurance, yet it failed to be operational as a currency. Due to its volatility, Bitcoin was transformed into a place of value.

Although in 2021 Bitcoin is not entirely representative of the cryptocurrency market, Oliver Renick noted that if Bitcoin fails, it’s a “giant red flag to all other risk assets,” which could spell the demise of over 10,000 cryptocurrencies. However, even though crypto may be invalidated in the global marketplace, blockchain still has value.

To The Flipside

• The current regulators don’t understand how cryptocurrency and blockchain work.
• Because they are an untested and new economic model, it is difficult to assess the value of cryptocurrency and other blockchain products.

It could ultimately fail

Several arguments can be attributed to crypto’s market denial. Primarily, the market can fail because of the industry’s erosion from within, as it raises regulatory red flags. Scams, market manipulation, get-rich-quick-cult-like followers of crypto communities and other negative indicators are all warning signs for market participants and regulators.

However, ‘it will bounce back stronger’ is a prevailing industry discourse after every major price slide. Alex de Vries, a Dutch economist, said Bitcoin’s only current benefit is “hoping the value goes up, and someone pays you more than you paid,” showing Bitcoin is losing traction as a functional asset, aside from a store of value.

Crypto will be able to perform bilateral financial transactions inside an enclosed community if crypto is made unfeasible by government indecisions or inconsistencies with current financial models. Privacy coins and other utility tokens will still be accepted and utilized; however, institutional investors who have driven up crypto’s market worth will subside. Crypto will not become an economic instrument that challenges and unlocks new economic value. Crypto will continue to be a speculative investment.

What are the reasons to care?

Because blockchain is able to be implemented with or without cryptocurrency, there are important differences. If cryptocurrencies are blocked from accessing the global market, blockchain will still exist.

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