Unlike the previous bull runs of 2016 or 2020, this time around it will be very different.
Crypto exchanges ( both CeX and DeX) had a great time in the bull run of 2020-21, everyone was making insane amounts of money and everyone thought that 'the only way is up'. Revenue-obsessed VCs poured billions into crypto exchanges hoping to catch the next 'Coinbase'.
The bull run of 2020 had incredible hype fueled by all types of ideas - Meme Coins,play-to-earn, NFTs, DeFI and Metaverse.
Meme Coins,play-to-earn, NFTs, DeFI and Metaverse.
Everyone from Elon musk to Paris Hilton was promoting a Meme coin or an NFT. Large companies like Facebook, Nike and LMVH were talking about Metaverse.
Every celebrity worth their salt was involved in NFTs or Metraverse projects.
Crypto Exchanges worldwide are running out of 'risk-takers' and ideas
crypto exchanges have acquired about 300 million crypto investors ( early adopters / risk-takers ), this is roughly 4-5% of the world's population. This is incredible growth for such a nascent industry, however, the steam might be running out the next time.
Let's face it, the industry is quite aware that most of the users are high-risk taking get-rich-quick 20-30-year-olds.
There are three main problems now
1) Crypto is no longer the fad it used to be, so everyone who wanted to be involved in these schemes is more or less invested already.
2) The vast majority of these investors are facing huge losses, and many are staring at bankruptcy. Regulators will be forced to act upon this time.
3) The more important thing is exchanges are running out of new ideas to attract users.
Crypto exchanges raised lots of investor money, many times by issuing exchange tokens. The problem is the cost of user acquisition for most exchanges is much higher than the money they make in fees. This was fine as long as investors poured in money hoping to catch the next Coinbase, but as investors pull the plug on new funding, a death spiral begins. Without new money, they can't generate enough cash flows to run the business which forces them to sell their exchange tokens which suppresses the investor interest even further and basically results in exchanges closing shop.
The Road ahead
Crypto exchanges face an existential crisis with many shutting down shops as they face mounting losses, but all is not lost.
The biggest problem with the current business model of Crypto exchanges is the lack of user stickiness. Exchanges spend a ton of money attracting users who may buy the new shiny NFT but don't become repeat users like on Instagram or TikTok.
Exchanges need to focus more on the long term and think about sustainability, great ideas are always around the corner.
'Invest-to-spend' is one such idea!
‘Invest-to-spend’ is a new way of spending that involves investing first and monetizing it by getting a loan against this investment which will be used for 'spending'.
‘Invest to spend’ makes crypto adoption less risky even for average users ( 500-750 M) by combining everyday shopping with crypto investing and thus helps trigger the next wave of crypto adoption.
'Invest-to-spend' opens up a new category of spending that was previously available only to the 'ultra-rich'
Benefits of ‘Invest to spend’
- Allows shoppers to spend ‘guilt-free’ and live ‘debt-free’.
- Allows people to get a second holiday / second shopping spree ( should the investment appreciate )
- No Credit-checks required, Doesn't affect Credit Rating
- No capital Gains tax
‘Invest to spend' can multiply revenues of crypto exchanges/businesses by combining Crypto-backed lending with 'Invest-to-spend' and more importantly exchanges can make money from users repeatedly.
Download the Research report on 'Invest-to-spend' for free for the next 10 days.
Disclaimer: This is not financial advice, I am not a financial advisor this information is purely educational, All Investments carry risk. Always do your own research.