FTX fell from the 7th most popular crypto service to 21st in November 2022 after filing for bankruptcy. Binance, Coingecko, and Coinbase dominated the most popular crypto services in 2022.
Binance and CoinGecko remain the only crypto services to fall into the financial services category, which is still dominated by heavyweights like PayPal, Stripe, and Alipay.
The financial sector generally includes a large group of industries associated with banking, lending, insurance, and investing, as well as different business activities related to the allocation of wealth and cash. Currently, though, there is a change in trend.
There is a growing dispute between the heavyweights of the traditional industry and the upcoming and relatively new crypto services. That is mainly due to the differences between both categories.
Crypto: Decentralized Nature of Financial Services
What stands out about crypto financial services compared to traditional financial assets?
The first attribute is transparency. Consider the markets for private placement, bond issuance, and stocks. Transparency of where those assets are located is not available to the average person. How they can be found is something fundamentally different compared to Blockchain.
Assets on the Blockchain, like Bitcoin and Ethereum, have transparency in terms of how they move, as well as which wallets hold different types of investments. There is transparency in terms of where those assets are located in the wallets. That is a fundamentally different operation mode.
The second difference is the settlement and compensation models between traditional finance, Blockchain, and digital assets. In mainstream finance, outside of over-the-counter (OTC) assets, most major products are centrally cleared assets found in large financial institutions.
The latter is actual control of the asset. Traditional financial institutions use promissory notes; promising institutions will issue assets when necessary.
Meanwhile, the former controls the leverage or lends it. For the latter, the digital asset space has the ability and technology, such as ledger devices, to manage assets to hold physical assets.
Financial crypto services have taken a significant hit, given events like the rise in illicit activities and the collapse of crypto institutions.
Cons of the Decentralized System
The fall of FTX dealt a heavy blow to the credibility of cryptocurrency exchanges, as investors questioned the safety of their money, and many returned to traditional payment services.
Since then, the heads of other companies have tried to reassure investors that their platforms are not at risk of facing the same problems as FTX.
For clients, a liquidity issue stands out. Individual consumers have much more faith in accessing their funds from traditional payment services than from crypto services.
Given the fear, uncertainty, and growing doubt (FUD) against cryptocurrencies, the rankings of big-name service providers have also taken a hit compared to traditional giants.
The dataset shared by Cloudflare Radar, a free tool that allows anyone to view global trends and information on the Internet, shed some light on the narrative. Said data shows that crypto-service institutions are still fragile compared to traditional financial giants. That crypto sector will take months or maybe years to move past the haunted past of 2022.
By Audy Castaneda
