Quick Facts
The Unlikely Silver Lining of Crypto’s Lack of “Frothy Use Case”
In the ever-volatile world of cryptocurrency, it’s easy to get caught up in the hype surrounding the latest trends and trends. However, a recent statement from Jason Guthrie, head of product at asset manager WisdomTree, has shed new light on the state of the market. According to Guthrie, the lack of a “frothy use case” in crypto is a positive sign for the asset class.
What is a “Frothy Use Case”?
For those new to the world of finance, a “frothy use case” refers to an investment opportunity that is characterized by extreme hype, speculation, and excess. These events often occur when a new or innovative asset class, such as cryptocurrency, experiences a surge in popularity, leading to a rapid increase in price and trading volume.
The Problem with Frothy Use Cases
While a frothy use case may initially drive up prices and attract attention, it can ultimately lead to a bubble that ultimately bursts, causing devastating losses for investors. In the case of cryptocurrency, the lack of regulation and oversight can make it particularly vulnerable to speculation and manipulation.
WisdomTree’s Take
Guthrie’s statement highlights the importance of sustainable growth and innovation in the cryptocurrency space. According to him, the continued growth of the asset class without a frothy use case is a sign of maturity and a potential for long-term success.
“Rather than relying on hype and speculation, we’re seeing companies built on this technology, growing revenue, growing client bases, continuing to innovate without really hanging their hat on one of these frankly less than useful use cases,” Guthrie said.
The ICO Boom and NFTs
In the past, cryptocurrency has experienced several frothy use cases, including the initial coin offering (ICO) boom and the surge in popularity of non-fungible tokens (NFTs). While these events drove up prices and attracted attention, they ultimately led to an unsustainable bubble that burst.
The ICO boom, which started in 2017, saw over $4.9 billion raised in just a few months. By 2018, this figure had jumped to over $33.4 billion. However, by 2019, the ICO market had largely cooled, with the total amount raised decreasing significantly.
Similarly, NFTs experienced a surge in popularity in 2020 and 2022, with trading volumes reaching $57.2 billion. However, like the ICO market, NFT trading volumes have since cooled.
A More Mature Market
Guthrie’s statement suggests that the cryptocurrency market has matured and is no longer driven by hype and speculation. Instead, the growth of the asset class is being driven by innovation and adoption.
“I think this is starting to feel like a more mature market that is really settling on its use case, its value prop,” Guthrie said.
The Role of Memecoins
While memecoins, such as Dogecoin and Shiba Inu, have experienced a surge in popularity in recent months, Guthrie believes that they do not pose a threat to the growth of the cryptocurrency market.
“I know there has been a bit of memecoin stuff, particularly around Solana, but it doesn’t seem anywhere near as prevalent as the previous kind of hype has been,” he said.
