As the crypto market tumbles, little is heard of crypto evangelists.
While not strictly speaking an evangelist, billionaire Mark Cuban has invested in the industry. He believes in his future.
But Cuban, as a seasoned investor, has also retained all of his clarity. In a recent interview with Fortune, the billionaire entrepreneur said that the crisis that the crypto space is currently going through will make it possible to distinguish valid projects from projects based on nothing.
“In stocks and crypto, you’re going to see companies that were supported by cheap, easy money — but didn’t have valid business prospects — will disappear,” Cuban said. “Like [Warren] Buffett says, “When the tide goes out, you can see who’s swimming naked.”
Bitcoin, the king of cryptocurrencies, has lost more than 70% of its value since November 10, the date of its all-time high of $69,077.44. The most popular cryptocurrency is currently trading at about $20,657.77, according to data firm CoinGecko.
Ether, the second largest digital currency by market capitalization, is down 77.6% from November 10, when prices hit $4,878.26. Ether is currently at $1,094.06.
This collapse is explained by fears of a recession prompting investors to liquidate risky assets, while the Federal Reserve is aggressively raising its rates to fight inflation that has reached its 40-year high.
But this is also due to internal scandals in the crypto industry. In May, sister tokens UST and Luna suddenly crashed, causing at least $55 billion to disappear after UST lost its peg to the dollar, qualifying its base as a stablecoin – which is a cryptocurrency pegged to a more stable asset like the US dollar or gold.
UST is an algorithmic stablecoin, which is not backed by dollar reserves, but rather by its sister asset Luna, which had to be burned or permanently destroyed via computer code.
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Cuban remains a crypto believer
A month later, cryptocurrency lender Celsius Network suddenly froze fund withdrawals from its platform. Since then, rumors of insolvency have been circulating about the company. Celsius has kept quiet about these rumours.
Despite this bad news, Cuban remains optimistic about the future of the crypto industry.
“Disruptive applications and technology released during a bear market, be it stocks or crypto or other companies, will always find a market and succeed,” he told Fortune.
He also said that cryptocurrencies are related to the Nasdaq. Tech stocks and Bitcoin have been paralleling lately.
“If rates go up, it will struggle until it’s priced in,” Cuban said. “The exception, as with stocks, is for new, groundbreaking applications.”
Cuban calls himself Ethereum maximalist, meaning he prefers the platform over other Blockchains.
The billionaire loves Ethereum because it is the most widely used blockchain, and the platform has smart contracts, a piece of computer code that determines the terms of a transaction (loans, trading, etc.) and does not rely on third parties.
“Any crypto investor or speculator should use these 4 factors to understand a token’s risk,” Cuban posted on Twitter on June 10.
He also owns other cryptocurrencies and non-fungible tokens (NFTs).
Cuban has invested in blockchain companies.