Over the last few years, digital assets have flourished. Yes, the market is in the midst of the latest bearish cycle, but a broader perspective shows promising development scores. Especially Bitcoin is officially
- Fascinated by institutional investors and service providers
- Showed promise as a storage / hedge asset of value (adopted for many financial reserves)
- Showed signs of functioning as a currency (Growth and adoption of Lightning Network)
- Adopted by each country (Central African Republic, El Salvador)
Beyond Bitcoin, we have also seen the rise of a whole new subset within the sector. in short,
- Decentralized Finance (DeFi)
- Digital securities
- Non-fungible token (NFT)
The list is growing, and looking at these achievements (along with past market highs), we overlook our continued need / dependence on traditional finance and what will happen in the coming years. It’s easy to get excited. Looking for a real-life check, you don’t have to search far beyond the current market downturn to ease expectations.
Just last week, each of Canada’s largest banks released their latest earnings report. It emphasizes that no matter how far digital assets go, there are still mountains to climb before they are freed from their traditional reliance on finance.
Canadian banks are better than expected
As it stands, much of the world is currently experiencing high inflation. Canada is no exception. However, despite what seems to be a difficult situation, major domestic banks continue to generate higher numbers than expected.
When a major Canadian bank released its second-quarter earnings report last week, it was one after another with better-than-expected earnings. This mainly led to an increase in dividends.
In essence, traditional finance remains lucrative and elastic while inflation goes out of control, housing markets reach new heights, and fuel prices soar.
Can Digital Assets Compete?
Among the major banks, the areas that have been pointed out to have contributed to better-than-expected performance are as follows.
- Retail and commercial lending
- Wealth management
Promisingly, looking at the list of reasons above that contribute to the performance of Canada’s largest banks, each is an area where digital assets can be confused.
Decentralized Autonomous Organizations (DAOs) have the ability to replace traditional wealth management and insurance services, although lending services are already common in both centralized and decentralized ways. On the other hand, charges can be significantly reduced by assets such as Bitcoin from Lightning Network.
One day, this ability to replace, or at least mainstream, match the bread and butter services offered by major banks represents a bright future.
Currently, it is estimated that about 300 million people from around the world have started this year as users of digital assets. This is a reduction in buckets. This all emphasizes not only the distance to develop technologies like DeFi (facilitating loans, interest-bearing accounts, value transfers, etc.), but also the possibility that it has not yet been realized.
DeFi hacks, UST-style collapses, and market strains will increase in the future. Digital assets may take years to be completely replaced by existing services, but progress is being made at a steady pace. Eventually, Lightning Network will become commonplace, regulatory ambiguity will be a thing of the past, and reliance on major banks will disappear.