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Don't assume that institutions saved the crypto world

EDZ

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Families, be confident. We don't rely on institutions

"XXX institutions began to buy BTC!" ", "XXX has increased his holdings again!" This bull market is known by most people in the market as "institutional bull". The entrance of external funds is bound to have a positive impact on the market, so that the scale of the Crypto market has expanded a lot, but it is not these funds from external institutions that really promote the progress of Crypto world.

Crypto's early days were rocky. No one knew how to use the distributed ledger technology, and most institutions had not heard of Crypto. IC0 let Crypto into the public field of vision, at this time the institutions continue to watch. DeFi and NFT are the real application landing, institutions can not sit still, rushed in. However, at this time, Crypto has formed a reasonable positive ecological closed-loop of developers, Crypto institutions and users, and the money of external institutions is just a catalyst.

This article from Threebody Capital tells a story about institutions and the Crypto world from the internal generative dimension of Crypto ecology. BlockBeats translated the original:

A year ago, the "golden age of DeFi" came to an abrupt end amid the orgy of food tokens (from Sushi to Yam to Burgers to Pancakes). A dream gives hope to the Crypto world, and the prospect of a dream come true makes the price of BTC and ETH rise sharply during Christmas and New Year.

The dream is, "Institutions are coming in!" .

Crypto field since its birth, has been promoting and pursuing legitimacy. To prove that Cryptocurrency isn't some crazy online game currency, Crypto enthusiasts attempt to reinforce their existing views by proving that Crypto exists in their "echo chamber" (the term for when a person only stays in an environment with beliefs or opinions that match their own), Without considering other points of view) has some value outside of the real world: this starts with Bitcoin being used to buy Pizza, Dogecoin being used to buy A Toyota. Later, THE CME (Chicago Mercantile Exchange) launched BTC and ETH futures. The latest news to cheer them up is that El Salvador has made BTC legal tender in the country.

The Holy Grail hope in some minds is that once Crypto is classed as a legitimate asset class, institutional capital, mainly mutual funds, will flow into BTC and Crypto circles, and this coveted capital will benefit the entire Crypto circle, which in turn will enrich all the early Crypto users. A common metaphor we use with institutional managers is to "own some Bitcoin" (get off zero), which corresponds to the idea that "if 1% of institutional capital were allocated to BTC, there would be staggering price increases."

That dream is still a work in progress -- and we continue to focus on that dream. With interest in the sector slowly growing among traditional investment managers, the dream is far from over. But our question is, does this dream still matter to us?

Let us look at the current situation of Crypto from the overall situation, can not help but come to the conclusion that Crypto has begun to explore its own development route: Crypto is built on the wealth created in its own ecosystem, rather than relying on the strength of institutions.

With or without an agency, Crypto will continue to grow

Reinventing a new world

We tend to forget that most of the "institutions" we can think of in the world today contain the names of their founders: They include J.P. Morgan, Goldman Sachs, Rothschild, Schroders, Salomon Brothers and Lehman Brothers and Smith Barney. Not to mention the giants outside the financial industry, like the Rockefellers, The Fords, the Mellons, the Vanderbilts and the Waltons.

It was individuals who created these great institutions, and the founders who made them the economic powerhouses of their time -- some no longer exist, some continue to survive, even though their internal corporate structures have evolved over decades or centuries.

Like other traditional industries, many of these big players have had a rocky start. But here's the difference: the founders of great institutions made a series of choices that led to exponential growth in wealth and the creation of intergenerational wealth. Of course, this also meant huge risks, albeit carefully calculated, but fortunately rewarded for their efforts: financing wars, investing in railroads, manufacturing goods, etc. These practices led to two centuries of unstoppable growth in what was then called the New World.

Interestingly, these founders weren't the first to do this; many made the move before them and enjoyed more of a first-mover advantage. But they were undeniably the first movers.

I think this is happening in Crypto as well. Those early players caught up with the exponential growth of the past few years and created intergenerational wealth. They were not the first players, but they were the first players enough to catch up with the economic explosion. And they are savvy enough to hold on to those gains.

This wealth has been reinvested in the ecosystem, giving rise to new types of Crypto "native institutions" backed by individuals who contributed to Crypto's rapid rise. But in the end, Crypto's biggest winners aren't "investors." Yes, they have made incredible gains. But the real winners we know are the people who built Crypto's foundations. Developers see the value of their own projects skyrocket as they achieve product-market matching and serve a growing market.

Investors and enterprising developers put their gains back into the ecosystem, promoting a virtuous cycle. When value snowballs, it not only creates jobs, but also sets the stage for building increasingly complex applications on top of the base layer of Crypto.

The most striking feature here is the number of founders/developers/entrepreneurs who have become very wealthy not only by investing in and owning their own projects, but also by their peers. If they cross-own projects from the start, they can take full advantage of synergies between projects and between projects and the ecosystem, which shows the beauty of the open source development philosophy. Imagine Steve Jobs and Bill Gates investing in each other's businesses? ... I'm afraid to think about it. For some, the rewards are astronomical. likeMetacartelSuch VC DAOs (community-managed pools of capital designed to invest in the community) are doing just that --Metacartel's list of partners is largely made up of top Crypto developers.

Developers are funding more developers, and that's enough. As we've written before,Code is eating the world. Unlike building a real economy that requires land, offices, factories, and raw materials, software-based applications (especially decentralized ones) require only code and a lot of intellectual capital. As a result, while the industry has plenty of capital, the amount needed to take projects from conception to implementation is much lower than it used to be.

Traditional "institutional" funding is by no means necessary for success because of the inherent nature of the code and the low barriers required to invest, coupled with the fact that the ecosystem is flush with cash.

Crypto is hard to navigate

For one thing, last year's violent rally that heralded an "influx of investment houses" was not attended by any institutions. I'm pretty sure of that, because the pull time is between Christmas and New Year's, and I've been getting holiday emails from these organizations since mid-December.

At some point, though, institutions may still get involved, as Crypto's growth continues to impact the business models they invest in (gaming, banking, payment services, etc.). More and more traditional businesses (and traditional payment services like Visa or PayPal) are adopting Crypto technology for their own use, rather than ignoring the nascent field. Since it's not going away, you might as well make friends with it.

But even if they do join, investors may find that the same factors that helped them to dominate in the past are now blocking their move into the new frontier of decentralization. One difference is that most cryptos are designed for sovereign individuals: assets are held in their own custody and can only be accessed through private keys, giving the wallet owner full responsibility as well as absolute control over their assets. That is, there is no customer service to retrieve your lost private key, hence the stories of would-be BTC millionaires who have long forgotten the password and are using up their few remaining opportunities with every false attempt.

Gone are the third-party custodians of traditional institutional investments, centralised clearinghouses, troubler-solvers, insurance companies that can solve big problems, and long legal documents that sweep away liability and risk. So, for traditional investment managers, Crypto investments are not only extremely unreliable from a risk perspective, but they are also constantly raising red flags, which places great responsibility on them. It's not surprising, then, that many Crypto "funds" we've come across in the past have founders holding more than 90% of their capital, since few real "investors" are involved, and the few that are are just following the crowd.

Although the establishment of Crypto project needs to take corresponding responsibilities, it has very low requirements for initial capital scale, which leads to the problem of position scale. However, as mentioned earlier, Crypto projects are not only essentially early-stage venture investments with a listing price, but also put investors in the awkward position of deciding how much to invest. So it's only to be expected that many traditional organizations don't think Crypto is worth their time. On the one hand, the position must be large enough to play a role in the fund; On the other hand, the position should not be too large, as the fund would then occupy too large a share of the project, not to mention the question of whether the token is sufficiently liquid for a fund of significant size to obtain the desired position.

In short, we are just part of the system. (To quote Another Brick In The Wall, Pt. 2 by Pink Floyd)

Follow your own path

So we're in a crisis: Crypto has developed its own path with the help of a lot of internal capital; On the outside, the traditional financial world is still on the sidelines, knowing that the system they painstakingly built won't help them get a piece of Crypto now, but they don't know how to reverse it.

Ultimately, we live in a liquidity-driven world, so we often forget that not everything needs to go with the flow. Institutions don't have to get involved: as long as everyone slowly joins the Crypto world, they eventually follow.

Even now, Crypto remains a mystery to most people: even well-defined concepts like DeFi are only understood by former Wall Street analysts, and the average person still has a vague understanding of them. High savings returns are nice, but for "normal" people, or "layabouts," they are hard to achieve.

Then came NFT art (which means really high-end, well-made art on platforms like SuperRare) and blockchain games (which we've written about quite a bit before)Axie Infinity). In our opinion, the emergence of these works marks a critical moment for Crypto -- they allow ordinary people to participate in Crypto: when you have a special item in your hands, the feeling of absolute ownership of an item will become clearer than ever. No matter you are with a piece of artwork of NFT, a penguin is a Axie, whenever you can use it to make some money, or put it in the game play with friends, or in the virtual world of your favorite (or in the home screen) to show, also can have a verifiable record of the ownership of the works of art that couldn't be better.

Finally, I want to say that markets are created by individuals, not institutions. The more Crypto works for people, the more valuable it will be.

Crypto doesn't need institutional approval because it's already proven itself. Like the United States after independence and in the early years after the Civil War, the United States was a market that grew in an environment of open innovation and then grew even stronger until it finally took back the top spot from its former colonizers.

Institutional or not, the world of Crypto will find its place.

Even if the agencies are sometimes nice to them.