With cryptocurrency very much in the mainstream at this point, with crypto cards making it far easier to access, a lot of people in the decentralised financial space have been reflecting on how much the market has evolved in order to do so.
Whilst there have been booms before 2024, the approval of spot Bitcoin ETFs which allowed bankers, traders and investors to benefit from the crypto market without entering the market at all has fundamentally changed how people engage with the market and the future that it represents.
Some founders have gone even further than this, with Rune Christensen, formerly of Sky (formerly MakerDAO), going so far as to claim that the “magic of crypto is gone” in a social media post.
This has sparked a lot of debate and reflection on crypto in the wake of Bitcoin reaching a six-figure valuation in November 2024, receiving institutional acceptance and support by several world governments and becoming an integrated part of many portfolios in traditional finance.
What was the “magic of crypto”, has it really gone, and what has replaced it if it has?
What Is Meant By The Magic Of Crypto?
The “magic of crypto” is as nebulous a term as it gets, and there will be as many definitions for what it is as there are investors, builders, users and creators in Web3, decentralised finance and cryptocurrency.
Mr Christensen describes it in the same way Hans Gruber described Alexander the Great’s conquests in the film Die Hard; he has claimed there are no more frontiers nor an “unfathomable wonder” to the technology.
The argument is that as crypto has entered a mainstream era, as defined by the availability of crypto products in traditional finance, it inherently stops being quite so decentralised in parts and becomes more firmly integrated into the technological and financial establishment as it exists now.
Has The Magic Truly Gone?
For some who have followed the Bitcoin story from its creation by Satoshi Nakamoto, cryptocurrency was intended to be an entirely alternative system of not only currency but also banking, purchasing and almost everything else.
In the wake of a Great Recession, Bitcoin in specific but cryptocurrency more broadly was seen as the answer, promising a future financial system that could, both technologically and practically, exist without centralised financial institutions or banks.
At its purest level, this particular spark of financial revolution has gone or at least has faded. By definition, Bitcoin and several other major crypto tokens have become “blue chips”; they are trustworthy enough to form the backbone of ETFs, portfolios and the strategies of mainstream financial institutions.
However, at the same time, they do still operate as an alternative to the mainstream market, pivoting more towards being a store of value or a digital commodity more akin to gold.
In that sense, it is still an alternative; Web3 technologies are still being developed and people have not stopped interacting directly with crypto separately from the mainstream financial markets.
What Has Fundamentally Changed?
When crypto started in 2009, it was primarily a fascinating technological exercise. Bitcoin could be mined at such a rapid rate and its value was so low that it took over a year for a purchase to even be made using it. It was a collection of technological innovations and ambitious dreams.
Over the following 16 years, crypto would fundamentally change; Ethereum would allow the blockchain to be more than a ledger of financial transactions, whilst the dream of a digital gold-like commodity and a practical digital currency would come far closer to reality.
There are entire ecosystems for buying, selling and trading an unfathomable number of tokens across dozens of different blockchains, with tokens being used not only as a store of value but also allowing access to services, voting rights via decentralised autonomous organisations and so on.
At the same time, there is a far greater awareness of what makes a token successful or unsuccessful, with both regulatory and investor scrutiny examining ambitious claims far more closely than would have been the case in the past.
As well as this, institutional involvement has an effect on which tokens will be successful, something that is significantly different to how crypto used to be.
Crypto stood at the intersection between technology and finance, but as traditional institutions become more involved, the latter takes precedence over the former and making crypto a known, trusted quantity takes precedence over innovation.
These institutions include governments, with the regulation of the market, Bitcoin laws and treasuries of digital assets being adopted around the world.