At the time of writing, Bitcoin is ranging in the lower $20k region. Having retraced 70% from its former all-time high (ATH), it has reclaimed the profits that investors accumulated over the last 18 months. Most altcoins record losses of over 90%.
As usual in bear markets, late investors are hurting the most and standing in disbelief. The promises of multiple X gains, passive income, and insane earning yields are dissipating quickly.
In each consecutive leg down, the market has been washing out leveraged positions and leveraged traders. It is exposing the companies and institutional investors which had gained credit without collateral – or those which had over-leveraged their digital assets, their marketing efforts, and their human resources.
Prominent exchanges overextended themselves by investing heavily in prestigious celebrity endorsements, expensive Superbowl ads, and excessive hires. Some are now retracting job offers, letting personnel go, and revising their fees and earning rates. Others have become insolvent, are blocking withdrawals and, in the worst cases filing for bankruptcy.
As a prolific investor and businessman Warren E. Buffet once said, “It’s only when the tide goes out that you learn who’s been swimming naked.”
Proponents of the centralised financial system criticise the crypto market for its volatility. Volatility, however, is not a bug but a feature in emerging markets. It serves as a necessary catalyst for meaningful structural transformation. During bear markets, companies with unsound business models and bad players get flushed out, leaving space for the rest.
As product cycles and market cycles are independent of each other, development around the blockchain continues despite the volatility.
As witnessed in previous cycles, the companies which stay engaged during the downturn can become market leaders in the next bull market:
Survivors of the early 2000 Dotcom bubble, such as Amazon and eBay, went on to dominate the world of tech.
Some of the successful apps used today, including Snapchat, Uber and Instagram, were developed for the iOS store following the financial crisis of 2008.
During the current market downturn, we have seen a major centralised cryptocurrency exchange (FTX) bailing out a failing lending platform (Celsius), a crypto custodian (BlockFi), and a trading app (Robinhood). The strategic move is reminiscent of J.P. Morgan rescuing failing banks and the stock market during the Panic of 1907.
Several exciting projects have either surfaced or reaffirmed their commitment during the current crypto winter:
Lightning Labs has been developing the infrastructure that expands the use cases for Lighting, such as the Taro protocol, a generic wrapper that could enable any asset to be sent over Lightning.
Through integration with payments provider Blackhawk, Strike wallet enables Lightning payment in stores such as Shopify and even in-person retail shops such as Walmart. (Strike uses Bitcoin for instant money transfers without exposure to price volatility).
A new cryptocurrency exchange by the name of XBO has recently opened its platform for early registrations. XBO is on a mission to make the advantages of crypto accessible to everyone. While putting the finishing touches to its web and mobile platforms, XBO is offering early registrants the opportunity to start their journey with advanced (Gold) tier benefits. XBO is also holding auditions within the Bored Ape community in search of an official representative. The owner of the selected Bored Ape will earn $100,000 in IP licensing rights! All that during a bear market.
Another exciting project to launch successfully this year is Stepn. The web3 lifestyle app combines NFTs built on Solana with Game-Fi elements. Once Stepn users purchase the dedicated running shoes (for $600), they are rewarded for physical activities in the Stepn native cryptocurrency. Signups have not slowed down during the crypto market crash. At the time of writing, the app has 800,000 daily and 3 million monthly active users.
Crypto winter is upon us, yet exciting projects are being built by new or committed companies – a silver lining on a cloud which will soon dissipate and reveal key players in the next market cycle.
