CZ, the founder, and CEO of Binance, offers his perspectives on the use of cryptocurrencies globally and what will spur the next wave of adoption.
CoinMarketCap sat down with Binance CEO and founder Changpeng “CZ” Zhao to discuss the future outlook for crypto adoption in 2023 for its 2023 CMC Crypto Playbook.
Adoption Measurement in an Eventful Year: 2022
CMC: How much have the industry’s collapses of 3AC, Luna, Celsius, Voyager, and FTX impacted user adoption in 2022? What about the collapses of other major players? Additionally, how do you gauge adoption in general?
CZ Binance: 2022 will not be a good year. Numerous unfavorable events have occurred.
Usually, I just use the price of Bitcoin, which is a generally reliable indicator of the market, to determine how widespread adoption is.
That line actually has the same shape as almost every other indicator we use, and historically, the user registration rate, trading volume, and other statistics of Binance have all been strongly correlated with the price of Bitcoin. Right now, When Bitcoin’s price was close to its all-time high [of $68,800] one year ago, the trading volume on Binance was about one-third of what it is today. These incidents collectively have had a negative effect on the industry by slowing it down.
The entire crypto industry goes through four-year cycles. Every four years, there’s a bear market. I think we are in one now: bear markets have historically lasted about a year, and we are now about a year out from the last all-time high.
upcoming user adoption wave
CMC: What specific actions do you believe the cryptocurrency sector can take to spur the next round of user adoption? Is it about creating DeFi [Decentralized Finance] solutions that are more user-friendly? Is regulating more centralized crypto providers the answer? Do you foresee any additional ways to promote cryptocurrency in 2019?
CZ: The more applications we create that users use, the better. It’s that easy. If you consider how the internet has developed, many different developers create numerous apps that make use of the Internet. We hardly even discuss the Internet anymore; instead, we simply use whichever app other people are using.
With DeFi, CeFi, wallets, faster blockchains, education, regulatory improvements, etc., it’s a similar situation in the cryptocurrency world. All of those things are beneficial. Regulation clarity is crucial because, in light of the unfortunate events that occurred in the sector, we need to increase transparency and trust. I believe the sector will need to transition to a much more transparent system that users can validate.
More people will switch to DeFi as a result of the recent problems with centralized exchanges. However, after a hack, a scam involving DeFi, or after someone has lost a significant amount of money there, people will turn back to centralized exchanges.
The industry moves incrementally in many different aspects at the same time.
CMC: If you had to choose what would be more important for adoption — building those new products or increasing regulation and transparency — which one do you think has more relevance?
CZ: For adoption, I believe products have more influence. For example, how do we make it easy for normal people to hold their private keys securely themselves, and more practically: when they become unavailable, how do their loved ones get access? Regulatory clarity is important and also helps adoption. But at the end of the day, it’s products.
Rebuilding in A Bear Market
CMC: Binance is like a microcosm of the industry at large — you have retail users with the spot exchange business, and you have institution clients with the futures product, custody, and venture side. With the different types of clients and users, which area will be the most challenging for the industry to rebuild trust in and increase adoption post-2022?
CZ: We’ve seen that more people move to their own wallets. TrustWallet is growing quite quickly versus the centralized Binance.com exchange. The institutional business, Binance Custody, has been increasing quite dramatically. Those two are the clear areas where things have grown faster, together with the growth seen on BNB Chain.
FTX was a big event. When it happened, Bitcoin’s price was around $18,000. Today, we are still at $17,000. Bitcoin’s price didn’t drop by that much — and Bitcoin’s price can drop by 5-10% on a normal day without any specific incident. The industry has been resilient.
CMC: We’ve all seen some bear markets. You’ve seen more bear markets than I have. What are the specific differences you’ve noticed in this particular bear market cycle compared to any in the past?
CZ Binance: The whole industry is bigger. In 2022, we have the metaverse, we have GameFi, we have DeFi, we have loans, and we have NFTs.
In 2017, it was just ICOs: and with ICOs, there were too many projects that wouldn’t make it. In 2013/2014, it was just the Bitcoin industry: only Mt. Gox went down.
Each cycle, the industry gets bigger. With this one, we’ve seen multiple players go down.
Adoption: A Way Forward
CMC: Where is the next wave of adoption likely to come from? Would it be from new geographical markets (i.e areas like LatAm or Turkey that see high inflation), new solid use cases (i.e. next-gen DeFi products, GameFi, etc.), or new participants (i.e. large asset manager/sovereign wealth, new age group users)?
CZ Binance: At the beginning of 2017, I would not have said ICOs. At the beginning of 2020, I would not have said DeFi. At the beginning of 2021, I would not have said NFTs. But then six months later, all of those things happened. It’s very hard to predict exactly which one will make it. It depends on the entrepreneurs that build in this industry. Whichever person or team builds a very sticky product, a very viral product, then that sector just drives a lot more users. But, collectively, everything moves forward.
I would guess as always, that adoption comes from new use cases, something that we haven’t really imagined. Institutional adoption has been talked about for years and it will come. It is coming already, slowly, gradually. Binance actually does have a lot of institutional users, Binance Custody has a lot of institutional users. That’s a very clear known use case and the adoption will happen at a certain rate. Regulations are coming at a certain rate, and those guys will come in.
The use of Bitcoin to hedge against inflation is a very clear use case. More and more people are learning about it and they will come in because Bitcoin has a limited supply. We’ve seen that different regions do have different use cases that are more prominent. In some parts of Asia, trading is very prominent, just because there are more traders there. In the North American region, institutional traders are more prominent. In Latin America, people do try to use cryptocurrencies to hedge against inflation. In Africa, people use, earn, and pay a lot more in crypto. We do see that geographic distribution differs to some extent, but not completely. It’s not black and white, but there are some different emphases.
I always think that the next hot thing is usually the one that people don’t really talk about and have not predicted.
CMC: Do you have any New Year’s resolutions for cryptocurrency next year?
CZ Binance: No, not really. I’m just glad that this whole bear market is going to be over and then…we’ll see how that goes.
This interview has been edited and condensed for clarity.