Thought Experiment: What Happens in Corporate Innovation if the Crypto World Implodes?

Why is cryptocurrency plummeting? 

‍

When it comes to cryptocurrencies, there seems to have been a proverbial disturbance in the force as far back as 2021. Here are just a few of the signs:  

• In May of 2021, Elon Musk announced that Tesla was suspending bitcoin purchases over the environmental concerns associated with mining (this was later revised to accepting Dogecoin).
• In June 2021, Britain’s Financial Conduct Authority banned Binance from operating in the U.K. due to not meeting anti-money laundering requirements.
• In August 2021, hackers stole over $600M from Poly Network (a blockchain interoperability platform) to expose their vulnerability (they returned almost half). 
• That same month, the IMF issued a statement saying that countries that use crypto as legal tender could threaten macroeconomic stability and harm financial integrity (because of crypto links with illicit activity).
• In September 2021, China issued a blanket ban on cryptocurrencies, making transactions and mining illegal. 

But 2022 is when things really started to get serious. June was particularly wrought with worrisome headlines detailing how:

• Cryptocurrency lending firm, Celsius Network, froze withdrawals and transfers due to “extreme” market conditions.
• Cryptocurrency exchange Binance paused bitcoin withdrawals, citing that a “stuck transaction” was causing a backlog.
• The collapse of TerraUSD stablecoin strengthened fears of a greater market collapse. 

‍

By mid-June, CoinMarketCap’s global cryptocurrency tracker was indicating that the total market cap of crypto assets had tanked below $1 trillion. Quite the fall when compared to its peak of $3 trillion in November 2021. 

That, of course, brings us to where we are today, with the fall of FTX precipitating steep drops in some of the biggest cryptocurrencies:

• Bitcoin (BTC) fell by 7,13%, its market cap decreased by 7,15%, and its trading volume decreased by 15,65%. 
• Ethereum (ETH) fell by 1,66%, its market cap decreased by 1,52%, and its trading volume decreased by 11,07%

Since then, female-founded crypto lender BlockFi has suspended withdrawals, citing “significant exposure to FTX and its associated corporate entities”. Once valued at $3B, the company is now rumoured to be filing for bankruptcy in the next few weeks. 

The flip side of crypto

The timeline above undoubtedly paints a grim picture, but there is a more positive flip side. Organisations all over the world are leveraging blockchain (the technology behind cryptocurrencies) to provide better services, work more efficiently and reduce operating costs. These are just a few of its most common applications:

• Data security and breach prevention
• Reducing supply chain and logistics inefficiencies
• Intellectual property management
• Fundraising and investments using security token offerings

In fact, as previously mentioned, most people would argue that without the use of blockchain, the move to web 3 would be impossible. Next to that, there are still plenty of crypto advocates, like founder and CEO of Pershing Square Capital Management, Bill Ackman, who explains:

“I think crypto is here to stay and with proper oversight and regulation, it has the potential to greatly benefit society and grow the global economy…”

And there are plenty of case studies to support the view that crypto businesses can change the world for the better, for example:

Lemonade Crypto Climate Coalition

Lemonade (a traditional insurance company) started using blockchain technology to protect vulnerable communities from climate change. The new tools have enabled them to offer weather insurance to small farmers in developing countries, ensuring that they’re covered against crop-devastating droughts. 

SolarCoin

Solarcoin is a non-profit that issues “solar coins” to solar electricity producers in recognition of their environmental impact. Every megawatt of electricity produced earns one SolarCoin. Their goal? To eventually make solar energy free. 

Brave

Brave is a browser and search engine that lets users turn their internet search history into an asset, which they can either protect or monetise (e.g. data can be traded for a “basic attention token”). It gives users the option of remaining private online and taking complete control over who sees their data. 

Insights from our Bundl venture builders 

Now that you know a bit more about both the positive and negative sides of crypto, let’s look at what our very own venture builders are saying about its impact on corporate innovation.

Q: If the crypto market crashes, how would it affect corporate innovation efforts?

Thomas Brady, Head of Partnerships: I don’t see it having a major impact in terms of corporate innovation for the following reasons:

• Cryptocurrency, despite being a tangible technology, can still be considered (within its current form) a bleeding-edge technology, or a technology before “its time.”
• The driving factor of its success has been the validation of its blockchain protocol, which has had a transformational impact on innovation efforts, especially within the finance and logistics industries. 
• Due to the POC of Bitcoin and it being considered one of the first killer applications of blockchain, the adoption and awareness of blockchain has skyrocketed. This, in turn, has positively influenced the need for corporates to innovate. 

So whether crypto and its markets crash, I don’t see a major impact in terms of corporate innovation (outside of the industries and companies that have betted and invested heavily within the space). The vast majority of organisations will continue to push forward, learning from the mistakes made by others.

Q: It looks like the world is heading towards a recession. From a macroeconomics angle, do you think crypto can survive? And should consumers care?

Nicolas Cap, Managing Partner and Corporate Venture Builder at Bundl: Based on my experience, I’ve got three insights to share:

• It looks like most banks and investment funds still have quite a small portion of their portfolio in crypto. This is a good thing; otherwise, this crypto crash could lead to bigger, more mainstream problems that affect the normal man in the street. Which I think won't happen now. 
• This crypto crash can be compared with the banking crisis in 2008. There was a lot of damage done, but in the end, the bigger, more robust players survived and came out of it stronger. Most likely, something similar will happen with crypto players as well.
• As the banking crisis leads to new rules and more robust governance, this will most likely also happen to crypto. Although this is potentially in contradiction with the initial non-regulation vibe where it all started.

Thomas Brady, Head of Partnerships: Crypto, will survive, and the way markets interact with the technology will change and evolve. I think the fraud, manipulation, and excess over the past decade will continue to increase the call for tighter oversights and regulation. 

Q: Access to new and practical technology (like crypto and blockchain) is often pounced upon in the innovation world, but it can be a risky game should a company invest in it (let’s say, as a corporate venture) and the world turns away from it (like the potential crypto crash). Is there a way to safeguard against this? What signs should we look for when experimenting with novel tech?

Hanne De Bauw, Venture Hub Lead: If the core of your business is being the middleman, connecting people, traditional banking or logistics operations, then blockchain is probably a threat. And to that, I say, if you can’t beat them, join them. Start testing if and how the technology can be applied to fortify your operations and assist your employees. 

My opinion is that it’s difficult to tell which way the markets will turn or predict what will happen. Every business is different, and if you ask me, the best way to find out how a technology can impact your business is to test it out for yourself. Always keep a finger on the pulse.

‍

Nathan Verduyn, Growth Marketeer: I think where we are today with crypto, and blockchain can be compared to where we were in the early stages of the internet, where people didn’t trust it. However, those that didn’t adapt eventually fell behind. It’s a similar pattern here. I don’t see people turning away from the technology. 

Now, as for safeguarding against risk, I think a good example would be what we do here at Bundl, setting up smaller experiments and validation tracks before investing millions of corporate dollars. In this way, we can test and utilise new technologies in a secure vacuum, scaling them only after they’re validated. 

You can’t really neglect new technologies. If you don’t adapt to how the markets are evolving, it’s dangerous in the long run. The best way to stay competitive is to start early, start small and validate at every step. 

Final thoughts

Despite the negative headlines, all signs point to blockchain and crypto continuing undeterred as a foundational part of web 3 - which means it’s pretty much here to stay. This quote by Ackman seems to capture the sentiment among many investors:

“I was initially a crypto sceptic [but] I have come to believe that crypto can enable the formation of useful businesses and technologies that [before now] could not be created. The ability to issue a token to incentivize participants in a venture is a powerful lever in accessing a global workforce to advance a project.”

What will change as the technology becomes more mainstream is the regulation surrounding it. New players in the industry will have to navigate a myriad of emerging regulations which will most likely differ from country to country and token to token. Here are just a few examples:

• The EU’s Markets in Crypto-Assets Regulation (MiCA) has already started mapping out a crypto framework.
• In the U.S., Joe Biden signed an executive order to examine cryptocurrencies in key areas like consumer protection, financial stability, illicit activity, competitiveness, financial inclusion and responsible innovation.

Some countries like Venezuela, Nigeria and Mexico are even moving to make Bitcoin legal tender, while El Salvador already did it last September. As for corporations, many are already working with cryptocurrencies, including Whole Foods, Starbucks, AT&T, Gucci, PayPal and many others. As the technology becomes more ubiquitous, a host of new ones are sure to follow. 

________

‍

Want to test a new concept or technology? Our validation support is powered by real customer data from tailored experiments performed on B2B, B2C or B2B2C venture concepts.