Wintermute CEO: The crypto dilemma comes from "centralized" institutions, but I still have faith in the industry

Written by: Wishful Cynic

Compiled by: TechFlow intern

People observe price charts, BTC rainbow charts, past halving patterns, etc., to HODL and choose the timing to buy the dip. Clearly, this is a form of male astrology. But at the end of the day, I believe it all comes down to macro and faith.

1) What is macro? Macro refers to those large institutional participants who do not care about Bitcoin's mission, do not care whether AAVE's technology is better than COMP's, whether SOL is faster, or whether it will be Optimism or Polygon that scales Ethereum…

They prefer to focus on:

a. Interest rates

b. Relative valuations

They care about whether DeFi will follow if the Nasdaq rises 100% tomorrow, and vice versa, the same goes for VCs. Apart from pure crypto-native venture capital firms (a significant portion of which may be below average), we generally do not see them taking much action.

Maybe Paradigm will continue to fundraise, maybe A16z will buy some tokens in the secondary market. But it won't move the price charts enough; what drives the price up is faith.

2) Faith is the beginning of the entire industry. Initially, it started as a dream of another world. In this world, we would break free from the shackles of government and traditional financial systems, and in this world, we would move towards a truly decentralized store of value.

What followed was another kind of faith—believing that early supporters should reap most of the benefits through token issuance, selling NFTs, and virtual land in the metaverse. Meanwhile, we also have BTC rainbow charts, halvings, "Bitcoin will never be lower than its previous peak," and so on to support our faith.

These beliefs created an internal bidding, a way of ignoring all external valuations. A method that is already prepared to be independent of the outside world. If we can transition to a decentralized metaverse, this dream can be realized.

In this cycle, we managed to create the opposite beliefs:

• One is that cryptocurrency has an impact on the environment. Very hypocritical (because cryptocurrency is singled out for some reason), but very popular.
• One is that the crypto/financial market is only about speculation, not key features—ownership.

While part of this is an excuse concocted by hostile regulators, the impact it has created requires us to put in a lot of effort to resolve.

3) Our current predicament is caused by centralized institutions. Terra itself is not dangerous—decentralized protocols refused to adopt it as collateral, but rather it was centralized groups eager to leverage its 20% annualized yield.

Celsius is the same; whatever caused it to pause withdrawals could not fundamentally be decentralized. But combined with another very centralized entity—3AC—it has caused the massive destruction we see today.

In fact, we still do not know how many lenders, exchanges, or how many people are in liquidation; it may take a week or two to see all the bodies washed ashore, during which we can see the industry's deleveraging reach unprecedented scales.

As long as there are centralized impostors among us, no matter how wonderful and vague they are, we do not have a sufficiently transparent system to predict what will happen next.

Ultimately, we have to accept that our industry will always be subject to the influences of the larger world. Of course, unless we turn this industry into the larger world, unless our industry becomes the system.

4) Faith has brought us to where we are now. I recently think that what we face today is an order uncertainty we have never encountered before. On one hand, it is correct, and on the other hand, we feel uncomfortable; this is certainly not just me feeling this way.

Looking back to 2008-2009, I remember clearly that many people were talking about the economic crisis. The world regressed a decade, and the EU disintegrated from the PIGS. It was indeed frightening, but in hindsight, compared to the past 2.5 years, it clearly pales in comparison.

I see people who have worked in this field for a while beginning to waver, but I do not feel that way. I entered the cryptocurrency space in 2017 because I was attracted by things that far outperformed traditional industries. Over the past five years, I have slowly but clearly realized that it encompasses much more.

But, I do not think crypto will succeed 100%; maybe what we see is just Bitcoin becoming digital gold, stored just like physical gold, but I am here to help build another reality.

What I want is a more exciting reality, a reality that is more resilient compared to the centralized system we live in now. We can certainly fail, but that is precisely my mission and purpose for being here.

However, if I become completely disillusioned with crypto, or if I think the probability of its success is too low—what else can I do? The outside world is a barren desert, except for space travel, which can ignite a spark of passion in me.

I worked at Optiver for 10 years, going from a junior trader to a senior trader. Every financial novel has detailed descriptions of this journey, and there is no need to repeat that.

In the end, I came here; I came to this field with no way back, only forward. Thousands of assets come and go here, buyers become sellers, and sellers become buyers. But what we really need to do is build and influence others.