Important points
- Cryptocurrency startups are increasingly challenged by external forces and must adapt.
- Bridging the gap between crypto natives and the broader market is critical to future success.
- The line between cryptographic and non-cryptographic products is blurring as developers focus on real-world problems.
- Institutions like BlackRock are influencing the cryptocurrency world and challenging native startups.
- The current phase of cryptocurrency adoption is characterized by increased accessibility for non-crypto natives.
- Despite the short-term volatility, the long-term trajectory of cryptocurrencies remains positive.
- The early stages of DeFi laid essential foundations for future cryptocurrency development.
- The “casino” mentality of the market may not be sustainable for the majority of users.
- NFTs attracted excitement in their early days due to their perceived value beyond physical assets.
- For future crypto apps to be successful, they will need to cater to both existing and new users.
- The current sentiment in the crypto market is comparable to the FTX collapse, and could even get worse.
- Speculative funds are moving away from cryptocurrencies and into other technology areas such as AI and defense.
- The cryptocurrency industry is moving from the “imagination stage” to a more mature stage.
- Three major sectors demonstrate product market suitability in cryptocurrencies: token issuance, stablecoins, and PERP.
- Winners in the crypto sector are often centralized, as opposed to the ideal of decentralization.
Guest introduction
The guests featured on Empire are prominent figures in the cryptocurrency industry, providing insight into the evolving landscape of digital assets. They are known for their deep understanding of market dynamics, highlighting the challenges and opportunities facing cryptocurrency startups today. Their perspective is critical to understanding the future trajectory of the industry as they focus on bridging the gap between crypto-natives and traditional markets. This episode covers the blurring lines between crypto and non-crypto products, the influence of institutions like BlackRock, and the sustainability of current market dynamics.
Challenges facing cryptocurrency startups
- Crypto-native startups are facing increasing challenges from external forces.
This is the first time I’ve really seen crypto-native startups, builders, and investors being challenged by the outside world, but I don’t think that will change.
— Dougie
- Bridging the gap between crypto natives and the broader market is essential to future success.
We need to accept where the puck is moving and realize that, like our little world, there’s a much bigger pie out there, and the people who can actually bridge that gap well are going to do very well.
— Dougie
- The involvement of institutions like BlackRock will continue to be a challenge for crypto-native startups.
I think this is the first time I’ve really seen crypto-native startups and builders and investors being challenged by the outside world…I don’t think that’s going to change.
— Guest name
- For the cryptocurrency industry to succeed, it must adapt to changing conditions shaped by traditional institutions.
I think for us to win…we have to accept where the puck is moving.
— Guest name
The line between crypto and non-crypto products is blurring
- As developers focus on solving real-world problems, the lines between cryptographic and non-cryptographic products become blurred.
I think we’re moving into the future pretty quickly. That disparity doesn’t really exist anymore, and it becomes nearly impossible to tell what is crypto and what is not.
— Guest name
- Those who refuse to embrace the fusion of cryptocurrencies and traditional finance will be left behind.
I think most parts will be left behind, and I don’t want to pretend like casino speculators that any part of cryptocurrency is dead…I don’t think that’s all.
— Guest name
- The current stage of cryptocurrency adoption is different as it is now accessible to non-crypto natives.
I think there are a few things that are different… It wasn’t really possible for cryptocurrencies to get into the hands of non-crypto natives… That’s all starting to change.
— Guest name
- The future of crypto applications must cater to existing users as well as attract new users from outside the crypto space.
The app needs to be useful to external users, but I think it’s hard to build purely for external users…there needs to be some overlap
— Guest name
Long-term vision for cryptocurrencies
- The future of the crypto space will continue to evolve despite short-term fluctuations.
I still think that in the long run, this is the future we’re heading towards and there will always be peaks and valleys towards it, but I think in 10 years what I’m saying will be true.
— Guest name
- The early stages of DeFi were crucial for building the foundational elements needed for the future development of cryptocurrencies.
I think we needed to do that right after 2020, and that whole defi phase was necessary to build all the primitives that allowed everything else to exist.
— Guest name
- The current trend in the cryptocurrency market is similar to a “casino” and may not be sustainable for the majority of users.
I think we’ve gradually moved to more of a casino type setup… It’s hard to keep this pure, 2-10% of users win and the rest get blown away over time
— Guest name
Market sentiment and capital changes
- Current crypto market sentiment is comparable to the FTX collapse, and could potentially get even worse.
It’s like the gauge sentiment in crypto right now is FTX levels, yeah, I think it’s worse, I feel like it could be worse, I think it’s gotten way worse out of the way, it’s somewhere, it’s somewhere around there, we can agree on that.
— Guest name
- The cryptocurrency market is experiencing a transition from speculative capital to other technology sectors.
There are other pioneering sectors of very cool technology that are viable that are essentially attacking the speculative bid that would have flowed into cryptocurrencies.
— Guest name
- The cryptocurrency industry is moving from the “imagination stage” to a more mature stage.
I categorize them as something like the imagine stage and the post-imagine stage, but it’s clear that we were in the imagine stage from 2020 to probably some point in 2024.
— Guest name
Evolution of the crypto sector
- There are three main sectors of cryptocurrencies that have demonstrated product market suitability and significant financial success.
I think there are basically three things that people are willing to pay for…token issuance…stablecoins, and purps.
— Guest name
- The current winners in the cryptocurrency sector are mainly centralized companies, which is in contrast to the initial promise of decentralization.
Winners in these areas are a lot like centralized companies… Tether is literally a $1 debt instrument in your bank account
— Guest name
- Projects focused on prediction markets and privacy are likely to gain momentum in the future.
I think there is clearly potential for prediction markets…privacy should eventually become more like a catch-catch-bid.
— Guest name
Adapting to a maturing industry
- The cryptocurrency industry needs to realistically adapt to the reality that not all founding principles will appeal to the entire market.
I think there’s a crowd out there that likes our spaces to exist purely and clearly…it’s time to start going to the world instead of expecting the world to come to us
— Guest name
- The idea that maximum decentralization is the best path forward has been proven wrong.
I don’t think the decentralization factor is that big of an issue anymore…the idea that maximum decentralization was the best path disappeared a while ago
— Guest name
- In the future, successful companies in the cryptocurrency space will be built by identifying specific customer needs, rather than catering solely to cryptocurrency natives.
In my opinion, that’s not how the next generation of companies in our field will be built.
— Guest name
The role of blockchain in traditional finance
- In the future, traditional financial institutions will adopt blockchain technology in a way that is more beneficial to their operations.
I see a world in which Tradfi is far better not just for using it, but for all its purposes… The result seems much more likely to be that world to me than not using it, or something closer to that world
— Guest name
- Most companies entering the blockchain space are likely to build their own solutions rather than using existing blockchains.
Most companies coming in probably aren’t going to use existing blockchains in the way we think…they might just build their own
— Guest name
- Corporate chains may not be a big investment, but they can effectively onboard users through tokenomics, which spreads the cost to users.
That means you can effectively onboard billions of users without actually paying any non-token costs. Most of that cost is borne by users through inflation.
— Guest name
Investment strategies in mature markets
- The demand for new general purpose Layer 1 or Layer 2 solutions has decreased significantly.
I don’t think there’s a big demand anymore for a new generic one or two etc…unless you have a good reason to exist, the game is pretty much over at this point
— Guest name
- Investments should be focused on infrastructure that solves a clear problem for application builders.
If you identify a clear problem, such as one that prevents an application from existing that you think should exist, it’s a great investment.
— Guest name
- Tokens that provide meaningful utility and influence are likely to hold value and grow over time.
There is a very short list of tokens out there that we feel are building something that meaningfully captures value and that we think will hold up well over time and grow in usage, importance, and influence.
— Guest name
Market trends and investor behavior
- Unlike previous cycles, cryptocurrencies have become a market for stock picking.
Cryptocurrencies have effectively become impossibly like the stock market… and that’s just it
— Guest name
- The current market situation requires multiple positive factors for a successful investment.
The difficult thing about today’s environment is that it takes more than one thing to go well…it takes a lot of stars to make things go well.
— Guest name
- The current market is characterized by more negative surprises than positive ones.
There are generally far more negative surprises than positive surprises.
— Guest name
The cyclical nature of the cryptocurrency market
- Cryptocurrency risk appetite can quickly rebound after a period of sell-off.
I think we need a period of cleansing ourselves of our indifference. Then you have to bid gradually in the face of selling out. Risk appetite could return quickly. Because there is such a large-scale movement.
— Doug
- Current sentiment towards cryptocurrencies is at an all-time low, with many investors refraining from participating.
I really don’t think sentiment has ever been this bad in terms of the number of people who have completely checked out.
— Doug
- Many of the arguments against cryptocurrencies are based on the misconception that overvaluation is a recent perception.
Things have been overvalued for years based on the basic metrics you can choose from
— Doug
Positioning for future opportunities
- Investors who are well-positioned during a recession will be rewarded in the future.
I strongly believe that you will definitely be rewarded for that in the future…I really think we are heading for better times
– guest
- The best investment opportunities emerge when confidence is lowest.
I always believe that just like when belief is lowest, opportunity is highest… when everyone believes in something is not when they are most actively involved, but when they are like I said earlier.
– guest
- Cryptocurrency offers unparalleled transaction efficiency compared to traditional finance.
Every time you interact with a trade… you quickly realize how good the crypto rails are.
– guest