The Rapid Evolution of the Crypto Space from a Wild West to Wall Street-esque: the Upsides and the Downsides

November 21, 2019 / by Zachary Mashiach

The ‘early’ days of crypto, only a few years ago, was a time filled with opportunity and intrigue. Since cryptocurrency technology was so new, there were no regulations, making it so that every business idea was legal for anyone who wanted to try. This basically made the crypto space a Wild West, but over the years, especially after the 2017 Bitcoin (BTC) rally to $20,000 and the initial coin offering (ICO) bust, the regulators have come in and corralled the crypto space. Now the crypto space looks more like Wall Street than the Wild West, so we will explore the upsides and downsides of this drastic change.

In the years following the launch of Bitcoin (BTC) in 2009, one of the first businesses to pop up was peer-to-peer crypto to fiat trading, i.e. Bitcoin (BTC) dealing. Bitcoin (BTC) dealers were especially necessary since there were no Bitcoin (BTC) ATMs yet, and not many choices for exchanges. Also, via a Bitcoin (BTC) dealer people could buy Bitcoin (BTC) in an anonymous and untraceable way.

Literally anyone could be a Bitcoin (BTC) dealer with just a little startup capital, even a few hundred dollars worth, and it could easily turn into a lucrative business with hundreds of customers. In-fact, Bitcoin (BTC) dealing was one of the top job opportunities in the crypto space since there was room for several big-time Bitcoin (BTC) dealers in every city in the world.

However, sometime around 2015, as peer-to-peer crypto to fiat trading gained volume and traction, the government stepped in and began to levy heavy regulations. Suddenly, Bitcoin (BTC) dealers had to be registered money service businesses and required money transmitter licenses. The government made it seem like the process of becoming official was no problem, but the truth was that tens of thousands of dollars were required to become a compliant Bitcoin (BTC) dealer. Even worse, the government required ‘official’ Bitcoin (BTC) dealers to collect identity information from customers and ask intrusive questions on what the Bitcoin (BTC) was being used for, ruining the whole premise of Bitcoin (BTC) dealing.

At this point, most Bitcoin (BTC) dealers had to make a choice between finding a different career or breaking the law, since complying with regulations was simply impossible for most due to the large reserve of capital needed to obtain a money transmitter license. In the end, many Bitcoin (BTC) dealers got arrested, and others simply gave up since the supply of Bitcoin (BTC) was being systematically cutoff and fiat payment accounts were being banned en-masse.

The crackdown on peer-to-peer crypto to fiat trading made it easy for exchanges like Coinbase, which were backed by large amounts of capital, to take over the entire crypto to fiat trade. Simultaneously, crypto to fiat ATMs began to proliferate, making Bitcoin (BTC) dealers even more obsolete.

Ultimately, the crypto to fiat trading sector began to look more like Wall Street with only a few bank-esque crypto exchanges dominating, and Bitcoin (BTC) dealers basically went extinct. An industry that had provided lucrative jobs for thousands of people had been centralized into a few wealthy and elite corporations.

Bitcoin (BTC) dealing is not the only example of the crypto space’s transition from Wild West to Wall Street. Back in the day, people could literally start any business in crypto. There were people launching their own crypto exchanges, crypto casinos, and brand new companies based around a native crypto token, allowing people to start crypto-centric businesses for basically any idea.

The days of being able to launch a crypto exchange from scratch came to an end around the same time that Bitcoin (BTC) dealers went extinct. Basically, regulations made it so only those exchanges with tens of thousands of dollars could be declared official, and any exchange operators who could not afford to be compliant were breaking the law. Aside from that, the successful exchanges basically took over the entire market share, leaving little opportunity for anyone else to launch an exchange.

As for crypto casinos, they were always gray areas, but there was a time where many people were launching them. Ultimately, the government hammer came down hard, and once it became clear that crypto casinos were illegal, they had to quickly exit the United States.

Starting a new crypto company based around a crypto token, basically an initial coin offering (ICO), was perhaps the last gasp of the crypto wild west. There was a time when people could brainstorm a new cryptocurrency, launch it, and possibly make a fortune on it by, keeping some tokens in reserve, mining early and fast, or selling tokens via a crowd sale. However, the widespread ICO bust during the bear market of 2018 that saw numerous ICO companies fail or be exposed as scams, caused regulators to come in with full force.

Kind of similar to how Bitcoin (BTC) dealing was banned, the Securities and Exchange Commission (SEC) said there would be an official process for launching an ICO, but it ended up that this process was basically impossible. ICOs were effectively outlawed from that point.

Essentially, the crypto space has gone from a Wild West where anyone had a chance to launch a successful business, to a highly regulated environment where only the big corporations can prosper, similar to Wall Street.

The upside of this is that crypto investors will no longer get burned due to investing in bad ICOs and that people will no longer get scammed due to bad Bitcoin (BTC) dealers or small-time crypto exchanges that run out of money. This makes it so that investors and crypto traders are less likely to be scared away due to bad incidents, facilitating long term growth in the crypto space.

However, the downside is that the crypto space is no longer abounding with opportunity. It is no longer the American Dream where someone with a few bucks in their pocket and the right idea can start a successful business. Now only the wealthiest of people have any chance at starting a crypto business due to all of the regulations, and even then the business choices are highly limited compared to the old days.

Ultimately, the crypto space has lost much of its magic, allure, and potential for small entrepreneurs. There are still job opportunities in the crypto space but nowhere near as many jobs nor anywhere as near lucrative as the business potential in the old days. Undoubtedly, this has caused a brain drain in the crypto space, and likely, many people who would have started successful crypto businesses in the past have steered clear of the crypto space and gone to greener pastures in other industries.

In the end, the Wall Street-ization of the crypto space, due to government regulators and power being concentrated into the hands of wealthy businesses, has made the crypto space no more opportune or appealing as any other financial sector, at least for the regular folks.

This may be good news for investors and consumer buyers/sellers of crypto, who are more protected than ever before, as well as the corporations that have been handed most of the crypto space’s market share, but it seems overall the crypto space has lost much of its magic and potential.

As Hunter S. Thompson once said: 

There was madness in any direction, at any hour. If not across the Bay, then up the Golden Gate or down 101 to Los Altos or La Honda. . . You could strike sparks anywhere. There was a fantastic universal sense that whatever we were doing was right, that we were winning. . . .

And that, I think, was the handle—that sense of inevitable victory over the forces of Old and Evil. Not in any mean or military sense; we didn’t need that. Our energy would simply prevail. There was no point in fighting—on our side or theirs. We had all the momentum; we were riding the crest of a high and beautiful wave. . . .

So now, less than five years later, you can go up on a steep hill in Las Vegas and look West, and with the right kind of eyes you can almost see the high-water mark—that place where the wave finally broke and rolled back.