The crypto has had a very bad year, with bitcoin’s 70% price crash putting it in better shape than many of the other top 10 cryptocurrencies, which have fallen 75% to 90%.
This puts them in much the same position as many companies in the payments and buy now, pay later industry, which have also seen their stock prices fall over the past 12 months.
However, this raises a more troubling question: why do companies like PayPal, Block and Affirm Holdings, all of which have proven business plans, revenues, strong customer bases and clear regulatory requirements to follow, not do any better than cryptocurrencies which, with one notable real exception – Ethereum – have none of that?
Admittedly, this is not an apples-to-apples comparison, or even an apples-to-oranges comparison, because even cryptocurrencies created by strong development foundations are still decentralized projects with big goals and potentially useful uses. revolutionaries. And they face serious credibility issues, from inability to scale to huge hacks and meltdowns, and live in a regulatory vacuum that increasingly hostile politicians and regulators are filling.
But the two industries have one thing in common: they are in the business of payments. Despite all the talk about bitcoin as an investment token as opposed to a payment currency, virtually all cryptocurrencies on all blockchains are transaction settlement tools.
Pain of payments
To some extent, payment businesses and cryptocurrencies have had the same overall problem over the past 12 months. Specifically, a growing sense that the end of a long bull market that even survived several years of pandemic-induced disruptions is in its final days and that a deep recession is approaching. And a massive tech sellout usually doesn’t help.
For payment processors, that means less business because people will pay for less, which is why PayPal fell 4.5% on Monday July 11 after its second analyst downgrade in two days – this Redburn Partners analyst Fahed Kunwar said because he doubted its ability to meet revenue expectations, with an e-commerce slowdown expected in the second half, The Motley Fool reported.
Still, its long-term growth prospects are considered good as e-commerce is expected to grow. This has not prevented its price/earnings ratio from falling from 63 to 18 in 12 months.
Block, which is all-in on bitcoin payments in a way that few non-crypto competitors are thanks to CEO Jack Dorsey’s strong belief in BTC’s future as a payment currency, doesn’t know a much better year.
Then there’s payments processor Stripe, which cut its internal stock price from $40 to $29, wiping out $21 billion off the startup’s own valuation. It returned to crypto payments in April, starting with the USDC stablecoin.
Read more: Stripe rolls out crypto payments capabilities and signs Twitter as first user
And a downside is that crypto can’t be good for either, as all three are steadily moving towards crypto payments, with Block with bitcoin and PayPal adding ether, litecoin and bitcoin cash to that.
See more: Cash App Integrates Bitcoin Lightning Payments
PayPal’s entry into buy now, pay later is showing signs of success – volume jumped more than 250% in April – but it’s an industry that’s seeing growing skepticism on Wall Street, as companies like Affirm Holdings, Block-owned Afterpay, and Klarna saw tank stocks as rising interest rates and a coming recession will drive up costs and drive down online shopping amid signs of defaults in Payout increments are beginning to appear, analysts and investors say.
See also: PayPal launches Pay Monthly BNPL offer
Despite the product’s endorsement, Apple’s recent entry into the space has sent shockwaves through stock prices, although it’s unclear exactly why Apple Pay holds a tiny share of the pay sector. payments, wrote Karen Webster of PYMNTS in June.
Read more: Is Apple Pay Later really a threat to Affirm and other BNPL providers?
The thing about the crypto price crash is that it is much easier to understand. Without exuberance, a product whose fundamental value proposition is years away at best is harder to sell in a downturn.
That’s the thing. While actual uses of the blockchain range are growing and there are signs of big finance embracing DeFi tools, there really isn’t a lot of “there” out there, at least for the moment.
See also: Crypto Basics Series: The Tokenomics of Crypto
DeFi, as Securities and Exchange Commission Chairman Gary Gensler noted this week, sees 95% of its business invested in other DeFi projects, so much so that it’s close to a closed system, despite signs that things like crypto lending are moving into the real world.
And the real underlying business case for almost all cryptocurrencies is that as their blockchains become increasingly successful, there will be more and more calls for a deliberately finite number of tokens required for any use. or deal. Which is good, but with no less than 10,000 blockchains, there is a lot of competition. Even though maximum token caps did not tend to be in the billions or trillions.
While Ethereum is widely used and more than a few real-world businesses run on the blockchain – Ripple’s cross-border payments network, for example – blockchains are unlikely to see undersupplied tokens for transactions to use anytime soon.
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