Deleveraging Complete: Time to be Optimistic

Songsari
3 min readNov 9, 2022

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We are approaching the year end of 2022.

Excessive leverages have been wiped out and the bubble has finally popped.

Crypto is going through a lot of things. In terms of FTX, I think there were subtle signs that provided hints about its business practices. The most apparent one is the serum token. I remember back in 2021, when serum’s total supply was increasing day after day with the coin’s fully diluted market value nearing $ 100 billion at its near peak. Personally, I would say FTX collapsed, because they deployed the same tactic that they had used for SRM to FTT. Printing money just doesn’t work.

Now, I will have to readjust my outlook for SOL.

SOL’s association with FTX makes me to rescrutinze the characteristics of the team behind SOL. While I will not make any conclusion at the moment, I would say that I am now more critical of the team behind the project. People are everything and I am a firm believer that one’s genuine internal motivation is one of the most important key elements that decides a company’s success vs failure. This is why I have so much faith in ETH and BTC.

It’s been almost a year of market going through corrections after corrections. I personally feel that the leverages that I have pointed out more than a year ago have been largely wiped out.

While a lot of people are pessimistic, I think it is now a good time to turn optimistic again. Historically, during this time, major players that would reshape the future and take down the incumbents get incubated and emerge. So, I think we have to look around to see new opportunities that are awaiting. I have a high conviction that a few those will emerge from the crypto space. The crypto startups that will reshape the future will likely be the ones that make real use cases of blockchain. I do not believe it will be crypto exchanges, meta-verse companies, nor P2E companies. Rather I believe they will emerge from the companies that use blockchains to move money. Currently, the most promising field for me appears to be cross boarder payments that bypass the current SWIFT network. It is a field that I am closely watching.

While I do not like to make predictions about future technologies, if I would have to guess, the blockchain field that power the new financial infrastructure will basically run on 3 layers of networks. CBDCs will be the one that guarantees fiat values. Stable coins will be pegged to CBDCs and actually backed by CBDCs, with third party audits and regulations providing insurances and compliances of stable coins. While it is not certain whether CBDCs will run on blockchain or not, I believe CBDCs will be way eaiser to interact with stable coins than the current money system that the Fed is using, which is ancient. The last layer will be the application layer.

This move basically reminds of the restructure phase of technology that has repeated appeared through human history, where old technology gets replaced with new technology. We don’t have to go back a century, to see those examples. Mainframes got wiped out during the PC revolution. Internet has made phone-lines and old telecommunication infrastructure secondary, while AT & T, once a dinosaur, has come down from its prime times. Smartphones have replaced Nokia, blackberries and countless of other old phone companies. Youtube bankrupted Viacom. Amazon bankrupted Barnes & Noble. Electric cars are replacing ICE cars. Netflix bankruped Blockbuster. The list can go on and on.

I believe financial infrastructure is also about to go through dramatic changes. The changes that are made day after day will be unnoticable. However, a decade from now, I believe a meaningful portion of the current financial infrastructure will be replaced with blockchain technologies.

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