Gaming Industry Avoids Worst of Crypto Crashes

Posted on: July 12, 2022, 12:25 p.m.

Last update on: July 12, 2022, 01:08h.

The crypto crash continues to worsen. Bitcoin (BTC) has been falling since mid-April from a value of around $40,000 to just $20,856.35 at its all time high yesterday. However, the effects of this fall on the gaming industry have not had a big impact to date.

bitcoin, cryptocurrency, financial, crash
A man looks at a bitcoin chart displaying the current value of the cryptocurrency in Istanbul on April 26, 2022. (Image: Getty Images)

Often, gaming is seen as a recession-proof industry, in which the big players will continue to roll, regardless of the pressure from external economic factors.

In terms of crypto-gaming, this may well be the case. When major cryptocurrencies are involved, they may be worth less, but they will likely survive this downturn. By “top cryptocurrencies” we mean BTC, of ​​course, alongside Ethereum (ETH), Ripple’s XRP, Cardano (ADA), Solana (SOL) and the most well-known coin, Dogecoin (DOGE) – a favorite of Elon Musk.

Where there is less certainty is for coins and tokens that are newer, lesser known, have less liquidity, and are less trusted by holders. Crypto-casinos or sports betting teams that launched their own coins, fan tokens and NFTs before this crash may well have seen their value plummet to next to nothing as consumers lose faith in the market.

Bitcoin and other coins that have plummeted in value have been a disaster for highly leveraged crypto businesses. Among them are exchanges and lenders without the required liquidity to weather what is known in the industry as a “crypto winter.” It gets its name because the assumption is that it will eventually thaw, only for prices to rise again.

Meanwhile, several crypto exchanges have downsized in recent weeks in a bid to stay afloat, while crypto hedge fund Three Arrows Capital (3AC) was forced into administration by a British Virgin Islands court last week. last. This caused a ripple effect for those he owed money to. The founders of 3AC, former Credit Suisse traders Su Zhu and Kyle Davies, have since disappeared.

Effects on crypto gambling

The crypto crash is definitely not the end of the crypto game. New crypto casinos have continued to be launched throughout this crisis, and betting industry stalwarts such as Jason Robins of DraftKings have continued to support the crypto industry as having an inevitable role in the future of gaming. .

This crash will eliminate many regulatory gray areas. Some jurisdictions will crack down in an effort to protect consumers from the kinds of losses suffered by many when Terra UST and its sister coin Luna crashed in May.

Others will use the extreme results of this accident as learning points for what must be avoided in the future.

Regulation has already been accelerated in several jurisdictions. The EU published its MiCA legislation at the end of last month, which aims to protect the EU financial sector and keep it competitive. While allowing consumers to have access to more innovative products. Overall, it aims to harmonize the EU’s approach to crypto regulation, so that every jurisdiction represented is on the same page.

Meanwhile, the G20 recently pledged to establish a cryptocurrency regulatory framework that should extend to all countries represented by the group. The Financial Stability Board, which brings together the group’s financial interests, said it was time to bring the “speculative” crypto sector under a regulatory code.

“The failure of a market participant, in addition to imposing potentially large losses on investors and threatening market confidence resulting from the crystallization of conduct risks, can also quickly transmit risks to other parts of the market. ‘crypto-asset ecosystem,’ he said.

Calls for US regulation

The United States has also stepped up its work on crypto regulation, recently banning federal personnel holding crypto holdings from participating in the crypto regulation debate where they might have a conflict of interest.

US Securities and Exchange Commission Managing Director Gary Gensler has reiterated his belief that BTC is the only cryptocurrency that can rightly be defined as a commodity – potentially handing it over to Commodities scrutiny. Futures Trading Commission (CFTC). This is when the SEC keeps a firm grip on everything else, including ETH, much to the chagrin of that community.

As the pace of regulation accelerates, gambling industry confidence is likely to grow as well.

The game has gone too far down the road of regulatory scrutiny to risk a backlash by incorporating crypto too soon. But as frameworks emerge to mitigate these risks, licensed operators are likely to start opening their products to crypto and blockchain innovations.