Rook’s View on the State of the Crypto Markets
With major coins down 80% from all-time highs, a sense of uncertainty about the future of crypto has set in among investors and the wider public. In times like these, it’s important for companies who believe in the long term potential of crypto technologies to address public sentiment and speak to their future plans.
Rook’s mission is to make home ownership more affordable. Record home costs and a stagnating wage base have made getting into a home impossible for many Americans. At the same time, growing financial uncertainty compels investors (both crypto and traditional) to look for new stores for their cash. Bridging these two worlds is our goal and bringing residential real estate on-chain is an important part of that.
Same Story, Different Day
Against the backdrop of today’s markets, we believe our vision is more viable than ever before. The recent crypto crash has been unique in some ways but, at its core, it’s largely familiar. This crash was a repeat of margin call cascades that we have seen before in traditional finance — whether that be over-leveraged hedge funds, or century-old banks.
In 2022, some crypto participants suffered similar fates after taking on too much risk at a time when dramatic market volatility caused runs and failures in the system. Centralized exchanges provided incredible lending rates while being over-leveraged behind the scenes. When stress tested, the house of cards came crashing down. While many centralized entities collapsed, it was decentralized protocols, backed by over collateralized protocols and liquidation mechanisms codified in Smart Contracts, that weathered the crash. The robustness of these protocols combined with the elimination of intermediaries in financial transactions is a big reason why we’re bullish on web3.
In the past, crises caused by on-margin trading have been trailed by increased regulation and more guarantees from central entities (usually governments) that people’s money is safe as long as it’s entrusted to blue-chip institutions. These guarantees bring with them a different set of incentives for lenders, some of which skew toward encouraging even more degenerate lending from morally bankrupt institutions. In some ways, the promise of crypto is to circumvent this bloat by giving everyone access to unrestricted borrowing and trading. It is the reckoning of this promise that we are currently in the midst of.
Regulators are wasting no time after the crash
The Rook Model
At Rook, we believe the bridging of real world assets with on-chain finance is important not only because it unlocks new markets for buyers and sellers, but also because it provides access to stable, real-world assets to back your crypto. At the end of the day, real world assets like real estate will never crash 80% in a few months the way coins like Ethereum have. Decentralization maximalists may take umbrage with this view, but we believe that, in order to bring meaningful change, some amount of working with existing systems is necessary. That is why we have architected our platform within the consumer finance and securities regulatory frameworks as a foundation to build upon and adapt from.
In our ideal world, crypto holders can purchase shares of residential real estate on our platform to use as a stable and appreciating store of value. They can then make trades, risky or not, using the rest of their portfolio, but they will always know that whatever crypto they entrusted to Rook is backed by a bona fide financing instrument secured by residential real estate and will still be there when they come back for it.
The Rook platform today
This crash has not only failed to dissuade us from our conviction in this model, it has solidified our intuition that such a service is necessary and emboldened our sense of purpose. In fact, we believe the best time to build in crypto is right now, when the signal-to-noise ratio is extremely high and those chasing shiny objects have cooled on the crypto space.
In a world where the securing of money by central entities such as governments is fraught with fine print and a litany of personal disclosures, the bridge between real world assets and crypto finance is the best way to ensure anonymous stores of value. Doing it all while helping people get into homes is exactly the synergy that mission driven companies like ours should strive to pursue.
Rook: Full Steam Ahead
In closing, we are prepared to ride out the rough waters and we are cautiously optimistic about the future that’s on the other side. We’re doing our part to make that future sustainable and beneficial for all involved. There’s lots more we will be announcing in the near future as we build more and more of our vision to ensure that home ownership is not just a dream anymore.