When the Los Angeles Rams defeated the Cincinnati Bengals in the National Football League championship game last February, an unlikely group of players splashed off the field in living rooms across the country. On one of the biggest nights on American television watched by 99 million people, the Super Bowl broadcast was punctuated by a string of cryptocurrency commercials. Social media has been buzzing about how digital tokens have matured, with mainstream giants such as Coca-Cola and General Motors winning prime-time slots that previously dominated.
With multiple big crypto firms collapsing in recent months, the sector that promised an alternative to the traditional global financial model now faces existential questions. In May last year, the TerraUSD and Luna coins crashed, losing almost all of their value overnight and wiping out $45bn from the crypto market in a day. Singapore-based crypto hedge fund Three Arrows Capital abruptly shut down. Crypto lenders Voyager Digital and Celsius Network – which had both loaned money to Three Arrows Capital – soon filed for bankruptcy.
Cryptocurrency trading platforms have traditionally drawn in customers with the promise of quick returns on investment. The offer: Park money in so-called crypto wallets – which are meant to function in a manner similar to savings bank accounts – and earn high-interest rates, sometimes in double digits. For those distrustful of traditional finance, the opportunity to carry out transactions without worrying about a regulator as an intermediary is an added attraction.
Others believe crypto is a transformative technology that has the potential to enable peer-to-peer decentralized financial transactions. MIT’s Catalini said the moment was similar to the dot-com bubble he burst in the late 1990s when many early online companies went bankrupt. Companies that survived or came later, like Amazon, are one of the “Internet giants of today,” he said.