Cardano’s founder predicts the collapse of the global economy. But then what will happen to cryptocurrencies?
Cardano founder Charles Hoskinson made a very pessimistic prediction about the future on Twitter the previous day. According to him, the world is following a trap of hyperinflation and governments that will just endlessly print new money. Unfortunately, cryptocurrencies have in a sense become very dependent on the global financial system. So what will happen to them? Here’s the entrepreneur and developer’s answer.
It's not the first time Charles Hoskinson has commented on what's happening in the coin niche. Earlier this week, he confirmed that the cryptocurrency industry has moved into what is known as a bear market, that is, a prolonged collapse. As a result, it is unlikely that any coins will deliver incredible returns: the conditions for that are simply not in place right now. You can read the developer's latest opinion at the link.
What will happen to the world and cryptocurrencies
Hoskinson’s main point about the current situation is as follows.
The world economy is not healthy.
Cryptocurrency market collapse
The ongoing collapse of the crypto market, in which its capitalisation has fallen by tens of per cent, has drawn a clear distinction between institutional – that is, professional – and ordinary investors. As Hoskinson noted, the latter still hope to use crypto as a means of “escaping the rogue global financial system”. The expert continues.
Institutionalists continue to get rid of crypto in their portfolios. Most of them perceive cryptocurrencies as a high-risk asset with huge returns. This has always been the danger of attracting Wall Street to the crypto market.
In other words, Charles alludes to the willingness of big investors to get rid of their own cryptocurrency assets because of what's happening in the market. Accordingly, this is unlikely to improve the coin situation going forward.
Because of their financial strategies and rampant inflation, bankers and venture capitalists have “already chosen their fate”. According to Hoskinson, they are “playing musical chairs” with a global economy that will collapse. The established system allegedly cannot sustain itself. Cryptocurrencies could be part of the economic solution, Charles said, but cautioned against a possible rush to market for projects that may prove to be “not the best investment vehicle”.
The point of cryptocurrencies is to restore trust, reliability and stability to the global monetary system.
Rising inflation in the US
According to Decrypt sources, Hoskinson hinted at the recent collapse of the UST algorithmic stackcoin project, which “dragged the associated cryptocurrency LUNA down with it”. The event caused quite a stir, with some crypto-enthusiasts on Twitter even comparing the collapse of LUNA to the closure of the infamous Mt.Gox cryptocurrency exchange. However, the industry has fallen on hard times before, so it is well positioned to cope with the new challenge.
Read also: Cardano's creator announces the start of a new "crypto-zima". Is this really the case?
Unfortunately, the cryptosphere in isolation has many local problems. One of them is cybercrime. According to analytics platform Chainalysis, hackers and fraudsters have already managed to steal more than $1.7 billion in crypto since the beginning of 2022 alone. And 97 per cent of the stolen funds have come from DeFi-protocols, i.e. products from the field of decentralised finance. Since January, investors have been rocked by two very large-scale hacking attacks at once – the Ronin protocol hack and the Wormhole bridge attack. The first case caused $622 million in losses, the second $320 million.
Amount of stolen funds in the cryptosphere by sector
This is a continuation of a trend that Chainalysis noted back in 2021, as the number of attacks on DeFi protocols began to increase throughout the year. In 2022, 69 percent of funds from cryptocurrencies linked to criminal activity passed through DeFi protocols. Recall that in 2021 the figure was recorded at 19 per cent. Here’s how Chainalysis experts commented on the situation.
One reason for this is that DeFi protocols allow users to exchange one type of cryptocurrency for another, making it difficult to track the movement of funds. But unlike centralised services, there is no need to go through customer identity verification procedures, which only lures in attackers.
As a result, governments around the world are trying to intervene. For example, last week the US Treasury Department added the cryptomixer Bender.io, used by North Korean hackers Lazarus Group, to its sanctions list. According to the Treasury Department, at least $21 million of the $622 million stolen from the Ronin hack has already been processed through Bender.
We think Cardano's creator's version doesn't sound so bad. Still, he admits that digital assets are in a position to save the situation - obviously, at least because the issuance rate and maximum supply of many Bitcoin-type projects is limited. Well, if we talk about Etherium, Avalanche and BNB, they burn transaction fees, which among other things has the potential to turn an asset into a deflationary asset.
So there is a chance that the coins could indeed be a lifeline in an economy where money is being printed in incredible quantities. Which means it makes sense to get to know them.
Related posts
