On paper, this could be the best of times for crypto. Instead, the industry of Bitcoin and NFTs seems to be struggling to find its purpose, reports Dan Brunskill.

Harry Satoshi, a crypto consultant from Christchurch, believed in Bitcoin so strongly he legally changed his surname to that of its pseudonymous founder Satoshi Nakamoto. Now, the 27-year-old founder and editor of Cryptocurrency NZ is worried the whole project has strayed off course.  

The original vision for Bitcoin was to create a peer-to-peer payment system beyond the control of governments and financial institutions. That hasn’t really happened. “Crypto is facing an identity crisis,” Satoshi said. “What most see now is a speculative asset class that behaves like a leveraged tech stock and centralised stablecoins the establishment can work with.” What he means is that most people treat crypto only as a gamble on getting rich, and not as a meaningful alternative to the financial system.

Retail investors have been pulling back from the crypto market over the past six months. Global activity was down 11% during the first three months of 2026 compared to the same period the previous year. Falls were largest in wealthy developed countries where crypto is mostly used as an investment asset. Activity held up better in countries like Turkey and Venezuela, where crypto can act as a useful alternative to their troubled currencies. 

Another market crash

The total value of cryptocurrencies has fallen from US$4.2 trillion in October last year to US$2.7 trillion today, a 35% drop in just six months. Bitcoin, which makes up about 60% of the market, has also fallen 36% from its US$125,000 peak. It has significantly underperformed global sharemarkets over the past five years. Since 2021, the S&P 500 has risen 74%, while Bitcoin is up just 37%. That works out as an average annual return of about 6.5%, similar to a balanced Kiwisaver fund.

Crypto users are accustomed to sharp swings in prices. This past year’s 35% fall should be no big deal compared with the 70% collapse at the end of 2021, for example. Except for the fact the industry was in existential trouble back then. Interest rates were soaring, wiping out speculators who had borrowed heavily. Major crypto exchanges collapsed due to fraud and mismanagement. And regulators in China and the US were cracking down.

Today, prices have fallen despite far more favourable conditions. Interest rates have eased, exchanges have become more professional, mainstream investors can buy crypto at the click of a button, and US regulators have backed off. On paper, this could be the best of times for crypto. Instead, the industry seems to be struggling to find its purpose.

Crypto exchange Binance surveyed its New Zealand users in April and found only 26% were positive about the market outlook in 2026. That’s a bad result for a group of investors best known for irrational enthusiasm.

Satoshi said too many buyers had been burned by previous market cycles chasing after a narrative that wasn’t delivered. Now, some are losing faith. “Hundreds of billions [were] rotated through Web3, NFTs, and memecoins — and when you ask what that actually produced, the answer feels pretty thin.” 

New era of utility, not hype

Janine Grainger, who founded and sold New Zealand’s largest crypto exchange, said the sector was becoming less hype-driven and more focused on building useful products. “If you measure crypto by, are people buying JPEGs and memecoins, it looks like a downturn. If you measure it by, are major financial institutions integrating blockchain rails, it’s clearly progressing,” she said.

“I’d say crypto is thriving in capability but surviving in public perception. Prices are down, hype is down, and retail participation is muted, but the underlying utility is still building out, especially stablecoins and tokenised finance.” Stablecoins are cryptocurrencies pegged to regular currencies, while tokenised finance are real-world assets like shares and bonds repackaged for blockchain networks so they can trade digitally.

That is to say, some of the most successful applications are not a new form of decentralised money. They are more like an internet-friendly layer of the regular financial system. Unlike Bitcoin, stablecoins are useful for making transactions as they hold a steady value in US dollars. They have proven to be a quick and cheap way to send and receive money internationally, although usage is still miniscule on a global scale.

Consultancy firms McKinsey and Artemis Analytics estimate US$390 billion worth of payments for goods or services were made using stablecoins in 2025. The vast majority of these were business-to-business transactions, although there are stablecoin-linked debit cards which can be used to make retail purchases.

But for Bitcoin’s true believers, like Harry Satoshi, stablecoins are simply an extension of the existing fiat system: digital dollars backed by US government debt and managed by private companies that already resemble banks. “If stablecoins are the destination, we built a very expensive road to nowhere,” he said.  

Tax bill brewing

There’s more trouble coming for crypto retail investors. Inland Revenue is preparing to come after untaxed profits after getting access to international exchange data. The tax department believes it has identified 355,000 digital-asset owners in New Zealand and 57 million transactions valued at $36 billion. Cryptocurrencies are treated as speculative assets for tax purposes, meaning gains are usually taxable even though long-term gains on shares or bonds often are not.

This makes crypto a less attractive investment than stocks, unless it can deliver outsized returns to offset the higher taxes. It also complicates Bitcoin as a payment method, as making a purchase counts as a taxable event.

Surely, being hit with a big tax bill will only make investment sentiment worse. That said, Bitcoin’s demise has been predicted in the media at least 472 times, according to a database maintained by Californian entrepreneur Jerry Feng. This article will not make that mistake. Bitcoin and crypto has embedded itself in enough corners of the global economy that it is unlikely to disappear.

But that doesn’t mean it’s living up to expectations. Crypto feels firmly in its flop era.