Crypto Firms Say Thousands of Digital Currencies Will Crash, Compare Market to Early Dot-Com Days

Crypto Firms Say Thousands of Digital Currencies Will Crash, Compare Market to Early Dot-Com Days

Several cryptocurrency industry players have told CNBC that thousands of digital tokens are likely to collapse, while the number of existing blockchains will also decline in the coming years.

There are over 19,000 cryptocurrencies and dozens of blockchain platforms. A blockchain platform like Ethereum is the underlying technology on which many of these different cryptocurrencies are built.

The recent collapse of the so-called algorithmic stablecoin TerraUSD and its associated digital token Luna, which sent shockwaves through the market, shed light on the thousands of cryptocurrencies in existence and their survival.

“One of the implications of what we saw with the release of Terra last week is that we're at a point where there's basically too many blockchains, too many tokens. And that confuses users. And it also comes with risks for users,” Bertrand Perez, CEO of the Web3 Foundation, told CNBC at the World Economic Forum in Davos, Switzerland, last week.

"Like the dawn of the internet, there were a lot of dot-coms and a lot of them were scams and didn't add any value, and that's all been cleared up. And now we have some very useful businesses and serious.

Brad Garlinghouse, CEO of blockchain cross-border payments company Ripple, said there will likely be a "number" of cryptocurrencies in the future.

“I think the question is whether or not we need 19,000 new currencies today. In the fiat world, there are perhaps 180 currencies, "Garlinghouse said.

Scott Minerd, Guggenheim's Chief Investment Officer, added even more pessimism last week when he said that most cryptocurrencies are "junk", but that bitcoin and ethereum would survive.

Industry commentary comes as the cryptocurrency market continues to be under pressure. Bitcoin is more than 50% lower than its all-time high reached in November, with many other digital tokens well below their all-time highs.

Many different blockchain platforms, from Ethereum to Solana, are competing for industry leadership. But Brett Harrison, CEO of cryptocurrency exchange FTX U.S., said not all of the hundreds that currently exist will survive.

"If you think about blockchains... in 10 years there probably won't be hundreds of different blockchains, I think there will be a few clear winners for different types of applications," Harrison said.

"And we'll see the market... sort that out over time," he added.

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