The launch of new cryptocurrencies has created a fractious and, arguably, oversaturated marketplace for investors – more than 20,000 different tokens are currently in existence. With each new cryptocurrency, calls for the industry to face greater regulation are amplified. What’s more, with the global economic outlook looking bleaker by the day, how will new cryptocurrencies stand out and thrive?
“The market is leaning towards becoming crowded and now presents somewhat of an impossible task for investors to distinguish which cryptocurrencies are the ones to be trusted and where best to invest their money,” says Dan Da Rosa, Co-Founder and CEO of recently released cryptocurrency token ETHAX. “This constant overload of unregulated crypto leads to daily negative headlines about cryptocurrency scams, resulting in investors being put off from buying and selling crypto. Albeit small, this contributes towards the crypto market's unpredictable behaviour.
“It is important that the entire community is aware enough to steer clear of adopting the stereotype that all cryptocurrencies are untrustworthy scams, as it would damage the reputation of tokens and coins that are actually legitimately safe.”
How can crypto tokens stand out in a crowded market?
ETHAX was launched in May 2022, intended to lower access barriers into cryptocurrency and make the process of investing safer and easier. With so many rival tokens on the market, Da Rosa says that new cryptocurrencies “should always aim to stand out but not at the risk of compromising your mission”. He explains that ETHAX’s differentiation is partly built on its design, brand message and its entire proposition – including introducing safety, loyalty and trust into the crypto market.
“In short, it’s very difficult to secure buy-in, particularly if you have no track record,” Da Rosa says. “Being an unknown in the cryptocurrency market presents difficulties with general market adoption.
“You can use classic marketing methods to grow awareness, and we’re seeing a lot of cryptocurrencies leaning on digital innovation and social media growth to expand their market share. But you walk a fine line by anchoring yourself early on to a message that doesn’t represent you and can ultimately ruin your reputation.”
On top of the challenge of standing out against other currencies, new entrants also have to wrestle with a general lack of understanding from everyday investors. According to a recent survey from Cardify, one in three crypto investors say they have little or no understanding of what they’re investing in.
Ben Reeve, a partner in Oliver Wyman’s Global Financial Services practice, says: “Emerging cryptocurrencies enhance the risk of information asymmetries across the ecosystem, which is driven by opaque and concentrated ownership structures, varying scope and quality of investor materials, and complex multi-platform market structures. Uninformed investors may lock capital into protocols that observe complex yet flawed mechanics for vesting, lockups, and overall security.
“Crypto illiteracy poses a challenge for on-chain growth as investors have become wary of more advanced functionalities such as staking, which is indicative of the depletion from DeFi totally value locked, falling from US$173bn to US$60bn since January.”
Does crypto have a future amid economic slowdown?
With global macroeconomic challenges, further questions will be asked about crypto’s future – particularly new and emerging tokens. After a slump in the crypto market, inflation has hit double figures in some countries, while economic growth in advanced economies like the US and the Eurozone is projected to slow to just 1.4% next year.
“Many people are rightfully looking inward for ways to save money and alleviate pressures, finding little comfort in a volatile market,” Dan Da Rosa says. “Naturally, fewer people are finding a reason to trust emerging currencies that they may never have heard of or know what the outcome will be. It’s a challenge, as we want to do what we can to educate people on what investing in cryptocurrency could mean for their investments on a long-term basis. But, for some, it’s just not a priority right now.
“On the flip side, for regular investors who have experience with volatile markets and the value of investing, they may be more inclined to choose a cryptocurrency that has an established overview of trends, dips and peaks to evaluate.”
Oliver Wyman’s Ben Reeve believes that regulation will be the largest near-term driver for development in the digital asset landscape, but argues that the current crypto winter is unlike others that have happened before.
“Different from past crypto winters, there’s a significant amount of infrastructure that’s been built and many crypto natives have accumulated healthy funds to last through the winter and continue innovating. While there might still be a slowdown, this could also be an opportunity for traditional finance players to catch up.”
Will increased regulation define the years ahead?
Dan Da Rosa believes the unregulated state of crypto could potentially undermine investor confidence, with just 0.01% of currency projects currently licensed and regulated. “The more unregulated cryptocurrencies that enter the crypto space, the more likely it is that we will see potential investors invest elsewhere and the market will become a more volatile space.”
He takes pride in the fact that ETHAX is among the minority of cryptocurrencies that are licensed and regulated for the services they provide, but would like to see more being done to crack down on the remaining majority. “We reduce the risk and ensure that we provide a safe platform for investors to learn on and develop their investing and cryptocurrency trading skills,” he says.
“We would like to see a complete shift in the cryptocurrency industry that encourages companies to be licensed and self-regulate. The crypto industry needs to unite on regulation, however, that proves a difficult task when so many cryptocurrencies are free to flood the industry with no or very low regulation standards.”
This is a sentiment echoed by Ben Reeve, who points to the disparate nature of regulation around the world: “The explosive growth of cryptocurrencies has led to nations urging their financial regulators to introduce frameworks for digital assets, but approaches have varied significantly on a global level, from some economies that embrace crypto technologies – such as Switzerland, Singapore and Hong Kong – to others with outright bans on crypto trading and mining activity.”
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