Crypto: From hype to establishment

Veronika Ferstl
8 min readJun 20, 2021

A lot of things happened in the financial and crypto space in the last month and after a recently bitkom panel, I decided to write a little summary about my thoughts.

Review: Development in the last 1–2 years:

The development of the last few years has shown us one thing above all: that you need strong nerves, patience and endurance! Not only from an investor, but also from an entrepreneur’s perspective.

As some of you may know the crypto market is like a roller coaster.

Since the beginning there are a lot of up and downs with almost daily news, and some of them have a major impact on the still very young market.

I see 3 topics in the last few years that have been important for the development of the industry:

  1. Regulation changed:

New laws were created, such as the crypto custody and electronic security act in Germany, which is a huge milestone.

2. Blockchain technology evolved:

Next to the bitcoin Blockchain there is another very important blockchain, called Ethereum, which is more than “just” a store of value. Ethereum runs so called smart contracts, which gives the user a lot more possibilities, eg DeFi products, that brings me to my 3rd point:

3. New use cases and products have matured, which are well known under the name “DeFi” which stand for Decentralised Finance and enables flash loans, staking and lending.

Flash loans are unsecured loan transactions that are repaid in the same transaction.

With lending, coins are lent. With staking they are held in a wallet to support the processes of a blockchain network.

These 3 DeFi products have in common that in return, the coinowner will be rewarded for their contribution. Comparable to the interest on a savings account (which no longer exists today).

About the last spike and crash in crypto market and the context:

In my opinion there are 3 main reasons that could have piqued the interest of institutions:

1. Due to the ongoing low interest rate policy, more and more pension and insurance funds as well as other investment firms are coming under pressure to generate profitable returns. Due to the lack of alternatives, they have to turn to new asset classes such as Bitcoin.

2. Fortunately, regulation evolving too. Even if it`s slowly, I can see a positive change of mindset, which is important, because Germany is kind of a role model in the field of EU regulation. For example, the regulation of crypto custody and electronic security act (eWpG). Nevertheless we need more brave decisions in politics, otherwise we could lose our advantage and China or USA will control the technology infrastructure very soon.

Of course, a harmonization will be the hockey stick to the market but I see also a positive involvement in the EU like MiCAR (Markets in Crypto Assets Regulation), so it`s just a matter of time.

3. Keyword: role model & courage

Both (role model & courage) were presented February this year when Tesla announced that they did invested in Bitcoin (1.5 Billion Dollars) and that they will accept Bitcoin as payment method for buying their cars. That was the biggest news this year. The message tremendously moved the market and Bitcoin reached a new ATH.

At the same time I see Elon Musk`s statements very critical because he can move markets and this can turn out to be dangerous. (You can read this my next article how Elon Musk is moving Markets.)

Institutionalization & Startups:

On the long run, larger financial institutions will gain important market shares. However, this will only happen when the regulation is clearer and more harmonized. And of course the volatility needs to be smoother.

Startups and more established players will cooperate and compete in this industry at the same time. Startups are more flexible and faster when it comes to implementing new business models. Large companies often find it difficult to make a decision at all. In return, large companies often have more staff and the necessary money to implement the projects. They might gain also more trust than a small startup, especially when it is a regulated entity.

I assume that many large companies either incorporate small startups or poach their staff at great expense. Perhaps a dangerous development for the economy.

The startup mentality is an important success factor in the German economy and must not be abolished by hurdles that are too great.

What I have experienced so far is the biggest challenge in the regulatory part, which is very complex, expensive and lengthy. That’s why startups often go to other countries to build their business. Germany has to be careful not to lose these companies and well-educated people.

Potential risks and obstacles for the industry:

If the government makes wrong decisions, like the latest draft for cryptocurrency transfers or a general prohibition, it could send the entire crypto industry back into a long and cold crypto winter.

Also, the current taxation is a problem because it makes no difference between the several kinds of tokens. For instance, a payment token should be differently treated than a security token. Otherwise a mass adoption in retail will hardly come true.

Regulation in Germany, the EU and worldwide:

Despite the risks just mentioned, Germany could be in the front seat, because they have already a good approach with the Digitalisation Strategy. In principle, regulation in Germany is on a good way and open for DLT.

Current regulatory initiatives such as the Markets in Crypto-Assets Regulation (MiCAR) on a European level and the FATF AML recommendations on a global level are set the course for the coming years and are currently being discussed as a top priority.

I highly appreciate an EU regulation, because harmonization is crucial to make this new asset classes trustworthy. It gives Fintech companies the possibility to operate in a save way. Nevertheless the draft needs some amendments.

The FATF AML recommendation is too strict so far. The regulators try to use the same requirements like they used before what makes no sense because it`s a new technology and they can`t use the same rules.

In guess this result is based on a low knowledge about this new technology. Otherwise I can`t explain for example why regulators requiring the determination and identification of the owner of “Unhosted Wallets”. In practice, this is not possible at all. In the blockchain world, you can easily create multiple wallet addresses without the help of third parties and pass the private key on to whoever you want. If the legislators knew that, they would not make such guidelines.

Probably a regulated sandbox where blockchain and fintech projects can develop would be helpful.

Digitizing securities:

Security tokens are regulated investment contracts hosted on distributed ledgers that are often designated for professional investors. Security tokens can represent an investment contract into an underlying asset, such as stocks, funds and real estate investment trusts.

The security token can represent the following four interests: profit or revenue participation rights, commitments to use or Voucher, ownership of tangible or intangible assets.

The added value of digital securities lies in the cost reduction, especially for small and medium-sized companies. Security tokens bring down the costs associated with raising capital, and this reduction in transaction costs is critical for smaller companies. The lower costs can then be passed on to the investors.

And from an investor perspective: Transparency, fractional ownership, direct access …just to name a few benefits

In essence, blockchain-based assets put investors in the driver’s seat instead of being steered by other parties. It creates transparency, trust and promotes personal responsibility.

Basically anyone can use the technology and participate on a financial market; that makes it so attractive. Of course, the technology has also a risky side, for example in the very early days when a lot of ICO`s popped up and some of them turned out into scams. But the industry has developed and professionalized so that today only serious STOs have a chance to successfully raise funds.

One of the main trends in the security token market is tokenized real estate, which became the highest growth segment in 2020. It more than doubled its number of offerings compared to 2019. Finoa -a digital asset platform for institutional investors — predicts that the global security token market will have 9.5 trillion dollars in assets under management by 2025. (Source: Cointelegraph Security Token Report 2021)

Unfortunately, shares are not included in the new eWpG (electronic security act) because they are not a property law. I hope that the legislators will soon implement this important part of the digitization strategy.

And of course, also the secondary market, responsibilities and cyber security have to be discussed.


Security tokens can already be bought, sold and traded in regulated and centralized security token exchanges referred to as “digital asset marketplaces” such as TokenSoft or on decentralized cryptocurrency exchanges such as Uniswap. But there is also regulatory uncertainty and also a chicken and egg problem, because the listing price on an exchange is very high and liquidity is still low so this is problem for issuers and investors.

The global market cap of security tokens trading on regulated secondary markets is currently only 700 million dollars and the trading volume averaged a little over 100.000 dollars in April 2021. This could change drastically over the next years.

The perspective completely changed once we understood the hockey stick in demand for tokenized traditional stocks such as Tesla, Coinbase and Apple. Tokenized stocks are fully backed digital representations of traditional stocks that are traded on a traditional exchange such as the NYSE or an alternative trading system such as NASDAQ. Recently, the cryptocurrency exchange Binance enabled tokenized stock trading for their users and the daily trading volume grew from zero to over 4 Million dollars within one month.

Many people think the digital representations are derivates, but they actually aren`t. The tokenized stocks can be converted into traditional stocks through a process with the issuer (eg CM Equity AG).

(Source: Cointelegraph Security Token Report 2021)

Outlook for development in the next 12 months:

This technology offers a lot of significant milestones and potential, even if we can`t imagine them today. It`s similar to the early days of internet. A new opportunity, a new idea, a new surprise can arise every day.

Just to name a few possible evolvements:

· DeFi products like flash loans will significantly rise

· Political decisions like in El Salvador will be announced

· Facebook with it`s Diem project (formally known as Libra)

· Other major companies like Amazon could try to gain market shares

· Breaking barriers like fiat on/off ramp will appear

· Green mining will take place increasingly

· New Tokens like non-fungible token (NFT)

Beginning of a new financial eara:

Basically, what we see in crypto space is the beginning of a financial revolution or enlightenment and in my opinion the “hype” will last for a long time. Of course, at the moment you can compare it to a roller coaster, but when adaptation curve smooths out, it will be a standard like operating systems for the internet.

A financial revolution has already started. We have seen this with Bitcoin first and last with GameStop. People are better informed than ever and they have the power to disrupt existing structures. The more people are let down by state, government and politics, the more they will fight back. That`s why the revolution began already.

In Germany we just haven’t noticed because we’re still doing too well …but if we take a look into other countries then we can see where the disruption will come from. Just a couple of days ago the president from El Salvador announced that they will accept Bitcoin as a legal tender. 70 percent of Salvadorans have no bank account. It is also a payment alternative in other countries such as Venezuela, where inflation devalues money.

There is no point of return anymore and it becomes slowly clear to institutional investors and big companies like Tesla.



Veronika Ferstl

Economist I Digital mindset I Blockchain, Banking & Real Estate I Consulting