The world is grappling with periodic Trump tariffs and their associated side effects, such as retaliatory tariffs, sharp market movements, and what appears to be a problem in the U.S. sovereign bond market. The speed at which all this occurs is overwhelming, and comments on it seem futile. A day later, the world could look completely different.
Therefore, instead, I am going to write about a slower trend I have noticed over the past couple of months: as large swathes of cryptocurrency increasingly resemble Sodom and Gomorrah, traditional financial institutions are embracing cryptocurrency, and there seem to be compelling reasons for this.
Traditional financial institutions, historically cautious or even dismissive of cryptocurrencies, uphold the foundational ideals of cryptocurrencies—decentralization, transparency, and immutability—while many new cryptocurrency enthusiasts who entered the industry after 2020 have largely abandoned these principles in favor of pure speculation and profit motives.
Institutional players now regularly praise the revolutionary qualities of cryptocurrency. They emphasize the benefits of decentralization for enhancing security, transparency for building trust, and immutability for protecting against fraud. This rhetoric brings them closer to OG cryptocurrency users than to the typical cryptocurrency participant today.
Take, for example, the head of digital assets at Blackrock, Robbie Mitchnek, who recently spoke at a digital assets summit about why Blackrock began working with Ethereum for BUIDL, a tokenized money market fund.
"There was no doubt that the blockchain we would start our tokenization on would be Ethereum, and this is not just about BlackRock. It is the natural default response. This is really important... Clients have clearly made the choice that they truly value decentralization, reliability, and security. And that is a significant advantage that Ethereum still has."
On the contrary, I feel that most recent entrants to the crypto industry are primarily defined by their skepticism and speculative appetite. A kind of crypto nihilism. Certainly, there are many reasons for this, but one of them undoubtedly stems from a series of failures or alleged failures in the cryptocurrency industry. Leaving aside world-class scammers like SBF, Richard Heart, and Do Kwon, even good decentralized projects have faced challenges.
Ethereum is arguably the most well-known of them. In 2016, a vulnerability in The DAO, an early decentralized investment fund, allowed a hacker to drain approximately $60 million worth of ETH. In response, the Ethereum community, led by Vitalik Buterin, voted to conduct a controversial hard fork to reverse the hack and return the funds. Essentially, they rolled back the chain, disregarding immutability.
Many other decentralized projects have struggled to deliver on the promises of decentralization. The decentralized stablecoin DAI from MakerDAO has largely been supported by centralized stablecoins after the market crash in March 2020, undermining its claims of censorship resistance. Layer-2 solutions often function as glorified multi-signature wallets, where control is maintained by a handful of individuals. Repeated outages of the Solana network and manual restarts have raised doubts about the credibility of its decentralization claims. Just recently, Hyperliquid delisted a token at a price significantly lower than the current market price after a malicious actor attempted to exploit an illiquid market on the exchange. All of this allegedly creates the impression that cryptocurrency boasts decentralization while not actually caring about it.
This shift in crypto culture is also largely dependent on broader changes in sentiment. Faced with economic disillusionment, widespread institutional distrust, and deep financial insecurity, young people increasingly see trading stocks, real estate, and cryptocurrencies as a means to escape what seems like a fraudulent system. From this perspective, such foundational crypto ideals as immutability may seem naive or even irrelevant.
On the other hand, traditional financial institutions entering cryptocurrency approach the matter from a completely different perspective. Firstly, they have no desire to get rich quickly—they are already obscenely wealthy. They seek out and invest in crypto projects that will create value, not extract it.
Secondly, they have a low time preference, meaning they measure investments in years and decades. On this timescale, you can see that cryptocurrency is a true innovation, promising substantial practical benefits. They are not disheartened by the apparent lack of progress over the last couple of years because they see the colossal progress made over 16 years.
Thirdly, these institutions are more pragmatic. They understand that decentralization can take time; look at the progress of Ethereum's decentralization since the hard fork, the significantly improved validator set of Solana, and the fact that Hyperliquid is already more transparent than any centralized exchange.
Thus, institutions now sound more enthusiastic about the technology than most people on Crypto Twitter (CT). This doesn’t mean that I am an advocate for institutions in crypto, as I am very cautious about them. It also doesn’t mean that I immediately believe what Larry Fink from finance says about crypto. Who knows if they really believe what they say, but at least I am glad that some important camp in crypto still advocates for crypto virtues.
