The crypto industry is going through a tough time, but a prolonged bear market is nothing new for those who have been around the space since 2017. While prices for many projects are down more than 80%, the sentiment within the industry has never been more bullish.
Many in the industry have championed the need for a break from soaring prices and mass user onboarding. CryptoSlate reached out to several of them to get their take on the future of crypto.
Bear market good for crypto
Nischal Shetty, the founder of Shardeum and the largest Indian crypto exchange WazirX, told CryptoSlate that in a bear market, “people are more cautious,” and as a result, companies have to “find organic ways to grow.”
The downturn leads to a need for better marketing content and thus “more reading materials for the consumers, thus leading to a growth in participation and a better understanding of Web3.” However, Nischal also believes “crypto winter” could last as long as “two to three years” before the industry can get back on a “growth trajectory.”
Andrew Durgee, Head of Republic Crypto, seems to agree and said:
“Ddownturns help the industry mature, and have become important phases where some of the most exciting innovation takes place.”
He added that Ethereum was born out of the 2014 bear market, and Polygon, Avalanche, and Algorand “took shape” after 2017. He said:
“I expect to look back at 2022 with a similar perspective—and I look forward to seeing what impactful projects emerge from this newest cycle.”
Regarding the potential length of the current crypto winter, Durgeee acknowledges that “patience will be important as we watch market sentiment settle.”
Meanwhile, Coinstelegram CEO Anna Tutova said:
“Bear Markets are a manifestation of release in inflated expectations the markets have placed upon a certain asset class.”
Tutova claimed that bear markets give birth to new projects and a “handful of new asset classes.”
DeFi and NFTs were born out of bear markets, so it is reasonable to predict that entirely innovative new digital asset classes could now be on the horizon. The current situation is a “time for building genuine companies, demanded by the market,” and “the deeper and the sharper the bear market, the higher the returns in the upswing.”
Tutova’s predictions regarding the length of the bear market look towards a technical analysis of the Bitcoin chart.
“The Ichimoku cloud on the monthly candlestick bars suggests that the bottom may be within two to three months, as we’re writing in the beginning of July, followed by a six to eight month long accumulation phase and a sharp rise towards the next market top.”
As we advance, Tutova believes that the crypto industry is on track to give the traditional financial markets serious competition “within one to two market cycles.” She added that:
“Blockchain technology could prove itself to be a game-changer in how the developing world catches up with the developed world in terms of their economic performance.”
Puff, the Lead Contributor to the Iron Bank, is also a believer in crypto winter as a catalyst for industry improvements.
“Bear markets allow builders to focus on building, without all the noise that accompanies bull markets – They are much less forgiving toward business models without product market fit, and projects that build and survive through them become winners in the next bull market.”
To do this successfully, builders must “be responsible for maintaining security best practices, together with user experience to simplify complex processes and make it seamless and easy to understand.”
Crypto Winter is purging illegitimate players.
Richard Heart, the founder of HEX, reminded CryptoSlate that “bear markets are great for shaking out weak hands.” In his short-term view, “as long as the FED is raising interest rates, the stock market will go down, and bitcoin along with it.”
He echoed Nischal’s comments and said that the “Bitcoin bear market could last a few years,” hoping it “bottoms at $11,000.”
Interestingly, he is more bullish on altcoins than Bitcoin, believing that “Ethereum and Pulsechain are likely to murder bitcoins returns” as “Bitcoin is old technology.”
With many flocking back to Bitcoin as a haven, it is interesting to hear that Heart sees a near future where “some coins are decorrelated from Bitcoin.”
Rob from Digital Asset News was to the point when asked how the bear market can help push crypto forward towards new heights, saying bluntly, “crap projects need to die.” His rationale is that “they are absorbing resources and market cap for an otherwise big cash grab.”
He looked back to 2017 and the ICO bubble that “could absorb this funding and make the founders rich while keeping the retail investor poor.” Interestingly he also highlighted that:
“These zombie projects STILL linger around and provide little to NO value to the crypto ecosystem, and they can stick around because they are not like usual businesses that need traditional overhead like a physical product.”
Rob said:
” I do not want a bear market. I want a crypto ice age where we get obliterated, and projects start consolidating into larger and better projects.”
While he accepts that “this will NOT be a popular opinion,” he thinks “it’s the right direction.” In his terms, the “crypto ice age” will last two years, given the correlation between when the next Bitcoin halving will happen and “how long recessions usually last.”
Shimon Baron, CMO at XBO, expanded on this sentiment, telling CryptoSlate that “the bear market that we’re witnessing offers a chance for novice crypto investors to enter the crypto trading and start exploring.”
The critical aspect of this for Baron is offering an “easy and safe onboarding, as crypto exchanges can seem intimidating to potential investors.” This sentiment of crypto requiring a better and safer user experience looks to dominate the BUIDLer economy of the current bear market.
Within this narrative, Tim Haldorsson, the CEO of crypto and NFT marketing agency Lunar Strategy, argued that “during market downturns, many savvy long-term investors view it as an opportunity to buy and make great deals.”
The recent announcement from a16z of a $4.5B crypto fund is a prime example of such an investment strategy.
Why we are in a bear market
Simon Schaber, Chief Business Development Officer at Spool.fi believes that offering “unsustainable” DeFi rates meant that “real decentralized financial innovation was crowded out” during the recent bull run. However, he thinks this is now over as he asserted that
“Now that this phase in the development of web3 has come to an end, attention will shift back to improving products. These phases of focus after a bear market have always been the foundation on which the industry advanced.”
Schaber theorized that “crypto winter could be as short as 6 months to one year” if central banks “reverse course in fear of global recession.” However, he pointed out that this is “the first time looking at a bear market dominated by institutional players.”
Asaf Naim, CEO & Co-Founder at Kirobo, warned that:
“It’s tempting to blame the crypto winter on specific occurrences, like the collapse of Terra, however, although it certainly didn’t help, it’s a short-sighted view.”
His view is that the “broader global economic uncertainty” is to blame but that there are “positives to be found in this depressing situation.”
Naim’s philosophy is that lower crypto prices act as an “on-ramp to new users” while the downturn helps “prune the market of illegitimate players and over-leveraged companies.”
The way out of the current bear market relies on crypto demonstrating “real utility,” according to Naim. Downturns are a time for “companies that offer real utility to finally shine.”
Incoming Crypto Regulation
One area that may be unwelcomed by some parts of the crypto community is the move towards greater regulation. The bubble of high-growth altcoins has inevitably popped, and many align this as a catalyst for tightening crypto regulation.
Blockchain developer and former MD of Microsoft, John deVadoss, told CryptoSlate:
“[The industry] is paying the price for extreme hyper-leverage, unbridled rehypothecation and a vicious securitization cycle that is visibly out of control.”
He believes that more regulation is now on the cards “to ensure that the rails, buffers, and constraints, are in place for accountable governance and responsible continued progress.”
Tony Dhanjal from Koinly echoed deVadoss, citing the “landmark regulation known as MiCA” in Europe as a route to “put an end to the crypto wild west.” He states that there is an “inevitability about incoming regulations” and that “crypto-asset service providers will need to be authorized in order to operate in the EU region.”
When will crypto recover?
Narek Gevorgyan from CoinStats said:
“For as long as crypto has been around, bear markets have been detrimental for retail investors who jump in during euphoric stage.”
Govergyan added that investors who didn’t have strong “convictions and vision about the market were washed away” while those with “thick skin” continued “to build the ecosystem despite the bloody markets.”
In the future, Narek is “on the watchout for new exciting things being built, in addition to the improvements made to existing projects that have managed to survive.” He was unwilling to make a short-term prediction on the length of a crypto winter but reasoned that “the anticipated Bitcoin halving due around mid 2024 serves as a solid and well-tested driving force behind bull runs.”
Zen Young, the CEO and Co-Founder of Web3Auth argued that crypto “will only recover when the general financial markets do” while asserting that bear markets “remove hype or speculation-based distractions and push all stakeholders to focus on practical utility and functional needs. The bear market will bring the focus back on building what matters.”
However, an analyst from Into the Block, Juan Pellicer, is a little less bullish as he considers that we must wait until “after the dust settles in some months” to see whether “crypto remains relevant.”
If it does, Pellicer believes it will have “proven resilient to market crisis,” but “right now is too early to say.”
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