How Close Is Crypto to Its Goal of a Libertarian Utopia?

Cryptocurrencies have always striven to achieve libertarian ideals; promising to represent what some have termed a “crypto utopia”. How realistic is this approach and might such ideals one day become a reality? Let’s see what the team at Crypto Lists has to say.

The cryptocurrency sector has always prided itself on the ability to avoid many of the regulations put in place by central banks and similar government authorities. Not only does this environment promise to offer a safe haven to governance-wary investors, but it has caused many to feel that cryptocurrencies are not correlated with open-market volatility.

Are such statements valid or do they represent nothing more than yet another attempt to build castles in a digital sky? Given the events of the past week, it’s pertinent to question some of the shibboleth of the cryptosphere, especially on a site like Crypto Lists – where we aim to help people make more informed decisions on the space. It’s a good idea to examine the current state of affairs to better understand whether or not a crypto utopia might one day come to pass.

What is Defined by a Fiscal ‘Utopia’?

It’s first wise to briefly define what is meant by the term “crypto utopia”. From a basic point of view, this type of environment provides investors with a regulation-free way to earn a profit without being hindered by governmental oversight. However, we aren’t necessarily claiming that such a marketplace would become a “free for all”. Many crypto purists believe that the self-regulating nature of blockchain (as well as supply and demand economics) would provide a substantial degree of stability.

As a result, this seemingly perfect world would be less affected by bearish scenarios such as inflation, sluggish consumer demand, and panic selling. The only drawback here involves the assumption that the markets themselves are not interconnected. So, where do we currently stand in terms of a truly utopian landscape?

The Problem with Traditional Crypto Narratives

“Even being in a stock, you’re effectively being in something that’s like a government-linked entity.” (1)

– PayPal co-founder Peter Thiel when discussing the drawbacks of traditional stocks.

From the statement above, we can clearly read into the anti-establishment undertones that have defined the crypto markets from the very beginning. In other words, they have been presented as a hands-off alternative to those who are wary about governments, banks and even big business in general.

If this were really the case, the marketplace would be immune from outside fiscal threats. However, this is far from the truth. The recent Bitcoin (BTC) crash saw prices slide from $68,000 dollars in 2021 to less than $15,000 dollars in Q4 of 2022. What underpinned such dramatic movements?

In the simplest of terms, BTC values (and crypto prices as a whole) have been negatively impacted by external factors such as inflation, rising interest rates and the performance of traditional tech stocks. It’s a bit ironic that the very same enthusiasts who touted the independent nature of cryptocurrencies are now the very ones blaming outside influences for this bearish climate.

To be clear, there’s no doubt that other factors are likely involved. Examples include the de-pegging of stablecoins such as USTC from fiat currencies and the liquidity crisis recently experienced by Celsius. Simply stated, crypto investors themselves might also be starting to lose confidence in their once-utopian haven.

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A Sign of Things to Come?

One point to mention involves the state of the crypto marketplace at the present. Many feel that traders are taking a more realistic approach in reference to how regulations may play a future role. This is even more relevant when we consider that new investors who are becoming involved might not be as keen to immerse themselves within a “wild west” domain.

So, it could be a good idea to redefine what the term “crypto utopia” actually stands for. Adopting a middle-of-the-road approach could actually represent the best way forward. This view has already been expressed by certain analysts who feel that some type of pseudo-oversight is required in order to provide a greater degree of stability. In fact, the Biden administration has already stated that it is prepared to lobby for more regulatory control. We have yet to see what form this move may actually take.

Libertarian (to a point)

Ultimately, the term “utopia” seems a bit dangerous to use when referring to any type of financial asset. As opposed to searching for the ideal solution, crypto enthusiasts would be wiser to adopt a moderate approach that helps to ensure market liquidity while also providing a greater sense of transparency. And, if the Binance and FTX war has shown us anything, it’s that crypto has now entered a maturation phase that sees the same behind-the-scenes moves and shakes that people are cynical about in regards to traditional finance.

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Sources:

1. https://www.investmentnews.com/crypto-libertarians-are-learning-the-reason-for-regulation-221842