There’s more crypto destruction to come: Blockchain.com CEO

For cryptocurrency investors who experienced their first bout of crypto panic in recent weeks – witnessing not only major bitcoin declines, but the crash of stablecoins, the collapse of LunaTerra and the fall from grace for Terraform Labs founder Do Kwon – get used to it, according to Blockchain.com CEO Peter Smith.

More pain to come, says Smith, more risk will be exposed, but ultimately it’s a good thing for the decentralized economy.

For the crypto investor, he says the lesson of the past few weeks should be back to the crypto equivalent of the traditional market investing concept of dollar cost averaging — slowly building a position in an asset over time so that all your money isn’t exposed to any single bout of volatility.

“Average into the slow,” Smith told CNBC’s “Worldwide Exchange.”

Bitcoin hit its lowest level since December 2020 earlier this week, below $26,000, and shares of the publicly traded crypto brokerage Coin base was down as much as 74% year-to-date this week,

“And you have to be prepared to hold it for quite a while,” Smith added. “Because we’re still in the nascent period of building out this whole financial system.”

Blockchain.com, one of the more established players in the space, founded in 2011, ranked No. 7 on this year’s CNBC Disruptor 50 list.

Lately, investors haven’t been patient, with the institutions that had piled into crypto pulling out in droves, taking away significant gains, leaving many novice retail investors holding the bag, a classic outcome of a market bubble.

“What’s happening in the market is a washout of risk and leverage across the entire global market system, and we’ve certainly felt that in crypto, especially in recent weeks,” Smith said. “I’ve said for a long time that this is going to be a long process of adoption and growth.”

This process will include more destruction in the short term as weaker links in the crypto-economy are wiped out.

“What you need to see is consolidation in the market itself as well as the companies that serve the market,” Smith said.

He tweeted recently on “creative destruction” making the crypto industry stronger in the long run, telling CNBC: “There are a lot of companies and protocols and assets where we need the process of creative destruction to come through the market.”

“I would expect that in the next few weeks after this really dramatic downturn in the market, some of the risks will start to be exposed through the economy,” Smith said.

This will include closing down the companies, trading companies and funds that have not managed the risk properly.

“It’s going to take a few weeks, if not months, to see the ripple effect of a really brutal two or three weeks for crypto,” he added.

Smith remained a crypto bull, telling CNBC as someone now witnessing their “fourth or fifth” market cycle in the volatile fintech sector, that “every single time there’s been brutal pain going in, but led to a stronger industry and more useful industry, and real fundamental growth over the next two to three years to follow.”

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