‘Crypto has had ups before, and it has had downs before’: Ethereum’s Vitalik Buterin is philosophical about the crash
Even so, veterans in the space are keeping positive: one being Vitalik Buterin, creator of Ethereum, the blockchain powering Ether, the second-largest cryptocurrency by market cap.
“Crypto has had ups before, and it has had downs before, and it will have ups and downs again,” Buterin told Fortune on Wednesday. “The down periods are certainly challenging, though they are also often the periods where the most meaningful projects get nurtured and built.”
Ether dropped below $1,000 last week, and on Saturday, fell to around $897. It has since recouped a bit, currently trading at around $1,149. It’s down about 76% from its all-time high of $4,847 in November.
But Buterin remains confident that the Ethereum ecosystem “will continue becoming a more mature and successful blockchain ecosystem that is ready to meet the hopes and dreams that millions of people have for the crypto space over the next decade.”
With macroeconomic factors, including higher than expected inflation numbers in the U.S., setting the stage for headwinds to come, the multibillion-dollar collapse of the Terra ecosystem exposed weaknesses within the crypto industry at large, setting off a domino effect.
In general, Buterin told Fortune in early June, “the Luna collapse is in some ways one of these important, kind of healthy moments in crypto reminding people that downsides are real. You can’t just build a system and magically pretend that the negative case is never going to happen.”
Situations like this have “silver linings,” Buterin said, adding that “at least in my experience, [what] always happens is this morally clarifying moment where you can see how different people responded and you get a much better view of what their character is and what kind of people they actually are than you do during the good times.”
On June 12, weeks after the demise of the TerraUSD stablecoin and its sister cryptocurrency Luna, one of the market’s biggest lending platforms, Celsius Network, paused its withdrawals, sparking rumors of bankruptcy. Reports concerning the state of multibillion-dollar fund Three Arrows Capital followed soon after, fueling further fears of contagion and systemic risk. Showing how interconnected some aspects of the space are, more and more crypto companies have come forward with updates on their financial health or lack thereof.
Nonetheless, Buterin still thinks that the good in the space outweighs the bad, he said in early June.
“I think the loudest applications of crypto are, in reality, far from the most common ones. There are definitely people trading $3 million monkeys. There’s definitely things getting hacked for $20 million once in a while. All of that stuff is real,” he said. “But the more common stuff that I think crypto does is not that…just stuff like random people around the world who are now finding it easier to just move money internationally and have businesses that collaborate across borders or store their savings and so forth. People who do them do them quietly, but it’s also very real.”
Alongside Buterin, others in the space have mentioned similar bullish takes on what’s to come despite the downturn.
“Disruptive applications and technology released during a bear market, whether stocks or crypto or any business, will always find a market and succeed,” billionaire investor Mark Cuban recently told Fortune.
“In stocks and crypto, you will see companies that were sustained by cheap, easy money—but didn’t have valid business prospects—disappear. Like [Warren] Buffett says, ‘When the tide goes out, you get to see who is swimming naked,’” Cuban said.
While this will be a “very bad” period for “poorly built or not very useful projects,” things will be “much less bad for valuable ones,” Sam Bankman-Fried, chief executive officer of cryptocurrency exchange FTX, told Fortune. “I don’t think we’ll see sectors die out, but we might see some rotate to more sophisticated versions.”
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