Thoughts on the FTX collapse
We believe in the premise that crypto is not going away. However, we try to reinforce the notion that ‘it’s not just about bitcoin.’ The sky-high speculations of last year, followed by the decline of valuations leading to the current crypto winter, along with the lack of confidence in the exchanges brought about by the collapse of FTX, does not diminish the changes we are seeing on the horizon.
The underlying technology of crypto has the potential to fundamentally change the way we move money cross-border, as well as disrupt the antiquated way property titles are created, stored, updated, and transferred.
Another example is auto lending – an important revenue source for credit unions – where auto loans can be represented more efficiently as smart contracts on a blockchain. It’s just a matter of time before this underlying distributed ledger technology transforms other aspects of banking – and PSCU wants credit unions, especially those not already thinking about this transformation, to be ready to pivot so they can remain relevant and competitive when the time comes.
Over the last several months, we have seen a decline in in the stock market, with the tech sector being especially hard hit. Given the current environment of high interest rates, there has been a temporary pull-back in investment in new technology. The FTX event that is dominating news cycles will likewise cause some rethinking by investors, who otherwise might be willing to save an exchange like FTX.
Crypto investors will now more thoroughly scrutinize underlying business models – much like the dot-com bust of the late 90s, when several overvalued internet companies and companies with suspect business models failed. While the dot-com bust was exponentially greater in terms of lost valuations, it cleared the field of some questionable startups, giving way to some of the tech giants we know today.
