UX is not enough to fight the Fed

Interest rates and crypto neobanks

This cycle saw the rise of the stablecoin-based neobank businesses in crypto. Web2 investors loved this narrative (Y Combinator invested in a few of them).

For the first time we had decent consumer-facing apps with great UX, catering to the retail investor who is too scared about the ups and downs of crypto tokens, but instead wants to get decent interest rates on their dollar savings.

This was particularly attractive in a zero-interest rate world.

It turns out a lot of that interest rate was generated by ponzi-like yields in ecosystems like Terra, that now completely blew up (or are about to blow up).

The unfortunate crypto credit investors tasted a very limited version of the bull market upside, but are feeling the full force of the bear paw directly on their faces.

Now that the Fed is finally raising rates, I wonder what’s left for the crypto savings account startups. Being able to save and access a global pool of capital is arguably one of the most interesting applications we have, but the space will be very damaged from a brand perspective. Rising rates and falling prices also make it much less competitive to save in crypto.

My prediction is that most crypto neobanks will either have to become neoexchanges and offer different products or fade into oblivion.

UX matters, but UX is not enough to fight the Fed.