The recent collapse in cryptocurrency prices raises new questions about Wyoming’s pursuit of the blockchain industry: whether the potential economic stabilizer is, in fact, another booming and volatile industry. recession.
Cryptocurrency values have fallen over the past week, with Bitcoin – the most important digital currency – losing about a third of its value in a single month.
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Blockchain, the technology behind cryptocurrencies and other high-tech innovations, has played a leading role in the conversation about Wyoming’s economic development and diversification for years. The Wyoming legislature first formed a task force to study blockchain regulation in 2018 and has since passed several groundbreaking bills aimed at making Wyoming an attractive home for cryptocurrency and other related operations. to blockchain.
The collapse in prices is nothing new to the world of cryptocurrency, a type of digital currency traded like stocks that are often subject to large gains and dramatic declines. The current sale follows a boom in post-COVID buying.
“Just more of the same”, Bitcoin written on his official Twitter account Wednesday with a chart of its five-year market performance showing a series of significant peaks and valleys.
This raises questions for Wyoming’s burgeoning cryptocurrency industry, which has seen increasing visibility in the years since the task force was formed. Several cryptocurrency firms have established presences in the state. Federal regulators have highlighted the state’s advances on the national stage. Several states, including Colorado and Texas, have begun to consider legislation similar to Wyoming’s.
Tech supporters, however, say it’s inaccurate to compare the volatility of cryptocurrencies to the boom and bust cycles of fossil fuels, which Wyoming has long depended on for its economic base.
Caitlin Long, CEO of Cheyenne-based crypto bank, Avanti Financial and a key architect of state cryptocurrency regulation, said the price drop was mainly due to the “dumping” of leveraged players – the people who own large amounts of cryptocurrency on credit – out of the market as a result of recent headlines.
As the decline has raised eyebrows, Long said, Wyoming’s regulations for special-purchase deposit institutions – a new type of cryptocurrency “bank” first made possible by Wyoming Law – operates under a completely different business model than crypto exchanges.
The main difference? Customer deposits must be 100% cash guaranteed.
“[What’s happening] has nothing to do with the outlook for Wyoming, ”Long said. “First of all, the [SPDI] Banks are designed to be leverage-free and are designed to shine in exactly this type of environment. But we haven’t even given up on all of our gains since the start of the year in Bitcoin.
“This is something normal for Bitcoin cycles,” she added.
Jim Caldwell, professor of computer science at the University of Wyoming in the university’s blockchain program, said the recent correction could actually help stabilize cryptocurrency markets by reducing the number of speculators trading. with her.
“I don’t think it hurts to have a fix like this,” Caldwell said. “I think it’s a good thing, kind of like a reset button. In the long run, we don’t want a bubble to form. “
Caldwell is an advisor for the University’s Cardano Stake Pool, a large cryptocurrency custodian used to monitor the health of the industry at large which also generates profits to help support student activities. The pool was created with the support of cryptocurrency firm IOHK.
While cryptocurrencies are always prone to volatility, Caldwell said, market corrections like these help strengthen the fundamentals of the currency, which he says has substantial financial value beyond its applications. monetary. However, he noted, even though Bitcoin and other cryptocurrencies tend to rise in the long term, they still carry significant risk in the short term.
“A lot of people have lost their shirts [in the recent correction], “he said.” I’ve heard of people who have sold their homes or cashed in their retirement to buy cryptocurrency right before the price drops. But I’ve always favored the slow, steady approach. The stock market goes up and down, yes, but I’m looking for the long term performance of the stock market.
Wyoming’s revenue is not yet exposed to cryptomarket volatility, Long noted. Beyond the filing fees paid to the Secretary of State’s office, revenues from SPDI banks – which are still awaiting Federal Reserve approval – have yet to start arriving.
The advantage of the technology is high, Long said. The value of cryptocurrency assets – despite the recent decline – remains on an upward trajectory, she said. Wyoming’s business model is expressly designed to withstand and take advantage of cryptocurrency volatility, she said.
Meanwhile, the Federal Reserve is closing in on approval from Wyoming’s SPDI banks. On May 5, the Federal Reserve announced that it would begin collecting public comments for a key policy change this would allow Wyoming SPDIs to begin using cryptography.
“Today’s announcement is encouraging news and the culmination of a protracted effort where Wyoming has taken the lead,” Governor Mark Gordon said at the time. “It was an unprecedented task and I appreciate the collaborative work that happened throughout the process. I am committed to ensuring Wyoming remains a national leader in digital assets. “
This article was originally published by WyoFile and is republished here with permission. WyoFile is an independent, non-profit news organization focused on the people, places and politics of Wyoming.